UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

x~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the Quarterly Period Ended July 31, ~~2019~~2020


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT

o~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT~~

For the Transition Period from to

Commission File Number 001-31756

(Exact Name of Registrant as Specified in Its Charter)


Delaware		13-1947195
(State or Other Jurisdiction of Incorporation)		(I.R.S. Employer Identification No.)

One Church Street, Suite 201, Rockville, Maryland20850

(Address of Principal Executive Offices) (Zip Code)

~~(301)~~ (301) 315-0027

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed since Last Report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xþ No o☐

Indicate by check mark whether the ~~registrant~~Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T ~~(§232.405 of this chapter)~~ during the preceding 12 months (or for such shorter period that the ~~registrant~~Registrant was required to submit such files). Yes xþ No o☐

Indicate by check mark whether the ~~registrant~~Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”,~~filer ”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o☐ Accelerated filer xþ Non-accelerated filer o☐Smaller reporting company o☐ Emerging growth company o☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x☑


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $.15 par value	AGX	New York Stock Exchange

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

Common stock, $0.15 par value: ~~15,633,302~~15,669,969 shares as of September 5, ~~2019.~~2020.

~~Table of Contents~~

ARGAN, INC. AND SUBSIDIARIES

~~FORM 10-Q QUARTERLY REPORT~~

~~JULY 31, 2019~~

~~INDEX~~

		~~Page~~ ~~No.~~

~~PART I.~~	~~FINANCIAL INFORMATION~~	3

~~Item 1.~~	~~Financial Statements~~	3

	~~Condensed Consolidated Statements of Earnings for the Three and Six Months Ended July 31, 2019 and 2018~~	3

	~~Condensed Consolidated Balance Sheets as of July 31, 2019 and January 31, 2019~~	4

	~~Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended July 31, 2019 and 2018~~	5

	~~Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2019 and 2018~~	6

	~~Notes to Condensed Consolidated Financial Statements~~	7

~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	20

~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~	31

~~Item 4.~~	~~Controls and Procedures~~	32

~~PART II.~~	~~OTHER INFORMATION~~	32

~~Item 1.~~	~~Legal Proceedings~~	32

~~Item 1A.~~	~~Risk Factors~~	32

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	32

~~Item 3.~~	~~Defaults upon Senior Securities~~	32

~~Item 4.~~	~~Mine Safety Disclosures (not applicable to the Registrant)~~	33

~~Item 5.~~	~~Other Information~~	33

~~Item 6.~~	~~Exhibits~~	33

~~SIGNATURES~~		33

~~CERTIFICATIONS~~

~~ARGAN, INC. AND SUBSIDIARIES~~

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

Three Months Ended
July 31,

Six Months Ended
July 31,

2019

2018

2019

2018

REVENUES

$
63,059

$
136,670

$
112,603

$
278,036

Cost of revenues

60,094

105,962

130,664

231,876

GROSS PROFIT (LOSS) (Note 2)

2,965

30,708

(18,061
)
46,160

Selling, general and administrative expenses

10,038

10,378

19,626

20,015

Impairment loss (Note 5)

—

—

2,072

—

(LOSS) INCOME FROM OPERATIONS

(7,073
)
20,330

(39,759
)
26,145

Other income, net

1,642

2,928

3,894

3,692

(LOSS) INCOME BEFORE INCOME TAXES

(5,431
)
23,258

(35,865
)
29,837

Income tax benefit (expense)

6,411

(6,314
)
6,932

(8,051
)
NET INCOME (LOSS)

980

16,944

(28,933
)
21,786

Net loss attributable to non-controlling interests

(174
)
(28
)
(287
)
(23
)
NET INCOME (LOSS) ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

1,154

16,972

(28,646
)
21,809

Foreign currency translation adjustments

(6
)
(693
)
(1,060
)
(1,272
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

$
1,148

$
16,279

$
(29,706
)
$
20,537

EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC. (Note 12)

Basic

$
0.07

$
1.09

$
(1.84
)
$
1.40

Diluted

$
0.07

$
1.08

$
(1.84
)
$
1.39

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

Basic

15,633

15,568

15,608

15,568

Diluted

15,757

15,673

15,608

15,673

CASH DIVIDENDS PER SHARE (Note 10)

$
0.25

$
0.25

$
0.50

$
0.50


	Three Months Ended				Six Months Ended
	July 31,				July 31,
	2020		2019		2020		2019
REVENUES	$	87,492	$	63,059	$	147,640	$	112,603
Cost of revenues		71,862		60,094		128,001		130,664
GROSS PROFIT (LOSS) (Note 2)		15,630		2,965		19,639		(18,061)
Selling, general and administrative expenses		9,085		10,038		19,429		19,626
Impairment loss		—		—		—		2,072
INCOME (LOSS) FROM OPERATIONS		6,545		(7,073)		210		(39,759)
Other income, net		451		1,642		1,539		3,894
INCOME (LOSS) BEFORE INCOME TAXES		6,996		(5,431)		1,749		(35,865)
Income tax (expense) benefit (Note 10)		(1,397)		6,411		3,057		6,932
NET INCOME (LOSS)		5,599		980		4,806		(28,933)
Net loss attributable to non-controlling interests		(10)		(174)		(40)		(287)
NET INCOME (LOSS) ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.		5,609		1,154		4,846		(28,646)

Foreign currency translation adjustments		(83)		(6)		(329)		(1,060)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.	$	5,526	$	1,148	$	4,517	$	(29,706)

NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC. (Note 11)
Basic	$	0.36	$	0.07	$	0.31	$	(1.84)
Diluted	$	0.36	$	0.07	$	0.31	$	(1.84)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		15,653		15,633		15,648		15,608
Diluted		15,788		15,757		15,767		15,608

CASH DIVIDENDS PER SHARE (Note 12)	$	1.25	$	0.25	$	1.50	$	0.50

The accompanying notes are an integral part of these condensed consolidated financial statements.

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

July 31, 2019

January 31, 2019

(Unaudited)

(Note 1)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$
170,710

$
164,318

Short-term investments

62,914

132,213

Accounts receivable, net

45,989

36,174

Contract assets

51,742

58,357

Other current assets

21,782

25,286

TOTAL CURRENT ASSETS

353,137

416,348

Property, plant and equipment, net

20,903

19,778

Goodwill

30,766

32,838

Other purchased intangible assets, net

5,545

6,137

Right-of-use assets (Note 7)

1,043

—

Deferred taxes

7,979

1,257

Other assets

351

290

TOTAL ASSETS

$
419,724

$
476,648

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable

$
26,028

$
39,870

Accrued expenses (Notes 2, 7 and 11)

30,928

33,097

Contract liabilities

1,758

8,349

TOTAL CURRENT LIABILITIES

58,714

81,316

Lease liabilities (Note 7)

616

—

Other noncurrent liabilities

1,325

960

TOTAL LIABILITIES

60,655

82,276

COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)

STOCKHOLDERS’ EQUITY

Preferred stock, par value $0.10 per share — 500,000 shares authorized; no shares issued and outstanding

—

—

Common stock, par value $0.15 per share — 30,000,000 shares authorized; 15,636,535 and 15,577,102 shares issued at July 31 and January 31, 2019, respectively; 15,633,302 and 15,573,869 shares outstanding at July 31 and January 31, 2019, respectively

2,346

2,337

Additional paid-in capital

147,445

144,961

Retained earnings

211,167

247,616

Accumulated other comprehensive loss

(1,406
)
(346
)
TOTAL STOCKHOLDERS’ EQUITY

359,552

394,568

Non-controlling interests

(483
)
(196
)
TOTAL EQUITY

359,069

394,372

TOTAL LIABILITIES AND EQUITY

$
419,724

$
476,648


	July 31,		January 31,
	2020		2020
	(Unaudited)		(Note 1)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	382,424	$	167,363
Short-term investments		25,204		160,499
Accounts receivable, net		29,660		37,192
Contract assets		26,523		33,379
Other current assets (Note 10)		39,645		23,322
TOTAL CURRENT ASSETS		503,456		421,755
Property, plant and equipment, net		21,692		22,539
Goodwill		27,943		27,943
Other purchased intangible assets, net		4,550		5,001
Deferred taxes		—		7,894
Right-of-use and other assets		3,466		2,408
TOTAL ASSETS	$	561,107	$	487,540

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	41,242	$	35,442
Accrued expenses (Note 10)		36,185		35,907
Contract liabilities		156,008		72,685
TOTAL CURRENT LIABILITIES		233,435		144,034
Deferred taxes		642		—
Other noncurrent liabilities		2,883		2,476
TOTAL LIABILITIES		236,960		146,510

COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)

STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.10 per share – 500,000 shares authorized; 0 shares issued and outstanding		—		—
Common stock, par value $0.15 per share – 30,000,000 shares authorized; 15,673,202 and 15,638,202 shares issued at July 31 and January 31, 2020, respectively; 15,669,969 and 15,634,969 shares outstanding at July 31 and January 31, 2020, respectively		2,351		2,346
Additional paid-in capital		150,847		148,713
Retained earnings		170,653		189,306
Accumulated other comprehensive loss		(1,445)		(1,116)
TOTAL STOCKHOLDERS’ EQUITY		322,406		339,249
Non-controlling interests		1,741		1,781
TOTAL EQUITY		324,147		341,030
TOTAL LIABILITIES AND EQUITY	$	561,107	$	487,540

The accompanying notes are an integral part of these condensed consolidated financial statements.

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JULY 31, ~~2019~~2020 AND ~~2018~~2019

(Dollars in thousands)

(Unaudited)

Common Stock

Additional

Accumulated Other

Non-

Outstanding
Shares

Par
Value

Paid-in
Capital

Retained
Earnings

Comprehensive
(Loss) Gain

controlling
Interests

Total
Equity

Balances, May 1, 2019

15,633,302

$
2,346

$
146,932

$
213,921

$
(1,400
)
$
(309
)
$
361,490

Net income (loss)

—

—

—

1,154

—

(174
)
980

Foreign currency translation loss

—

—

—

—

(6
)
—

(6
)
Stock compensation expense

—

—

513

—

—

—

513

Cash dividends

—

—

—

(3,908
)
—

—

(3,908
)
Balances, July 31, 2019

15,633,302

$
2,346

$
147,445

$
211,167

$
(1,406
)
$
(483
)
$
359,069

Balances, May 1, 2018

15,567,719

$
2,336

$
143,783

$
212,095

$
843

$
48

$
359,105

Net income (loss)

—

—

—

16,972

—

(28
)
16,944

Foreign currency translation loss

—

—

—

—

(693
)
—

(693
)
Stock compensation expense

—

—

338

—

—

—

338

Exercise of stock options

1,000

—

14

—

—

—

14

Cash dividends

—

—

—

(3,893
)
—

—

(3,893
)
Balances, July 31, 2018

15,568,719

$
2,336

$
144,135

$
225,174

$
150

$
20

$
371,815

Balances, February 1, 2019

15,573,869

$
2,337

$
144,961

$
247,616

$
(346
)
$
(196
)
$
394,372

Net loss

—

—

—

(28,646
)
—

(287
)
(28,933
)
Foreign currency translation loss

—

—

—

—

(1,060
)
—

(1,060
)
Stock compensation expense

—

—

926

—

—

—

926

Exercise of stock options

59,433

9

1,558

—

—

—

1,567

Cash dividends

—

—

—

(7,803
)
—

—

(7,803
)
Balances, July 31, 2019

15,633,302

$
2,346

$
147,445

$
211,167

$
(1,406
)
$
(483
)
$
359,069

Balances, February 1, 2018

15,567,719

$
2,336

$
143,215

$
211,112

$
1,422

$
43

$
358,128

Adoption of ASC Topic 606 (Note 1)

—

—

—

37

—

—

37

Net income (loss)

—

—

—

21,809

—

(23
)
21,786

Foreign currency translation loss

—

—

—

—

(1,272
)
—

(1,272
)
Stock compensation expense

—

—

906

—

—

—

906

Exercise of stock options

1,000

—

14

—

—

—

14

Cash dividends

—

—

—

(7,784
)
—

—

(7,784
)
Balances, July 31, 2018

15,568,719

$
2,336

$
144,135

$
225,174

$
150

$
20

$
371,815


	Common Stock			Additional				Accumulated
	Outstanding	Par		Paid-in		Retained		Other Comprehensive		Non-controlling		Total
	Shares	Value		Capital		Earnings		Loss		Interests		Equity
Balances, May 1, 2020	15,644,969	$	2,347	$	149,531	$	184,633	$	(1,362)	$	1,751	$	336,900
Net income (loss)	—		—		—		5,609		—		(10)		5,599
Foreign currency translation loss	—		—		—		—		(83)		—		(83)
Stock compensation expense	—		—		772		—		—		—		772
Stock option exercises	25,000		4		544		—		—		—		548
Cash dividends	—		—		—		(19,589)		—		—		(19,589)
Balances, July 31, 2020	15,669,969	$	2,351	$	150,847	$	170,653	$	(1,445)	$	1,741	$	324,147

Balances, May 1, 2019	15,633,302	$	2,346	$	146,932	$	213,921	$	(1,400)	$	(309)	$	361,490
Net income (loss)	—		—		—		1,154		—		(174)		980
Foreign currency translation loss	—		—		—		—		(6)		—		(6)
Stock compensation expense	—		—		513		—		—		—		513
Cash dividends	—		—		—		(3,908)		—		—		(3,908)
Balances, July 31, 2019	15,633,302	$	2,346	$	147,445	$	211,167	$	(1,406)	$	(483)	$	359,069

Balances, February 1, 2020	15,634,969	$	2,346	$	148,713	$	189,306	$	(1,116)	$	1,781	$	341,030
Net income (loss)	—		—		—		4,846		—		(40)		4,806
Foreign currency translation loss	—		—		—		—		(329)		—		(329)
Stock compensation expense	—		—		1,414		—		—		—		1,414
Stock option exercises	35,000		5		720		—		—		—		725
Cash dividends	—		—		—		(23,499)		—		—		(23,499)
Balances, July 31, 2020	15,669,969	$	2,351	$	150,847	$	170,653	$	(1,445)	$	1,741	$	324,147

Balances, February 1, 2019	15,573,869	$	2,337	$	144,961	$	247,616	$	(346)	$	(196)	$	394,372
Net loss	—		—		—		(28,646)		—		(287)		(28,933)
Foreign currency translation loss	—		—		—		—		(1,060)		—		(1,060)
Stock compensation expense	—		—		926		—		—		—		926
Stock option exercises	59,433		9		1,558		—		—		—		1,567
Cash dividends	—		—		—		(7,803)		—		—		(7,803)
Balances, July 31, 2019	15,633,302	$	2,346	$	147,445	$	211,167	$	(1,406)	$	(483)	$	359,069

The accompanying notes are an integral part of these condensed consolidated financial statements.

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended July 31,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income

$
(28,933
)
$
21,786

Adjustments to reconcile net (loss) income to net cash used in operating activities

Deferred income tax (benefit) expense

(6,722
)
924

Impairment loss

2,072

—

Depreciation

1,711

1,567

Stock compensation expense

926

906

Amortization of purchased intangible assets

592

506

Gain on the settlement of litigation

—

(1,400
)
Other

650

(380
)
Changes in operating assets and liabilities

Accounts receivable

(9,835
)
(19,946
)
Contract assets

6,615

(20,945
)
Other assets

2,722

337

Accounts payable and accrued expenses

(16,371
)
(18,659
)
Contract liabilities

(6,591
)
(23,228
)
Net cash used in operating activities

(53,164
)
(58,532
)

CASH FLOWS FROM INVESTING ACTIVITIES

Maturities of short-term investments

104,000

206,500

Purchases of short-term investments

(35,000
)
(91,000
)
Purchases of property, plant and equipment

(3,043
)
(5,365
)
Changes in notes receivable

—

225

Net cash provided by investing activities

65,957

110,360

CASH FLOWS FROM FINANCING ACTIVITIES

Cash dividends paid

(7,803
)
(7,784
)
Proceeds from the exercise of stock options

1,567

14

Net cash used in financing activities

(6,236
)
(7,770
)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH

(165
)
(399
)
NET INCREASE IN CASH AND CASH EQUIVALENTS

6,392

43,659

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

164,318

122,107

CASH AND CASH EQUIVALENTS, END OF PERIOD

$
170,710

$
165,766

SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for income taxes

$
2,982

$
2,333

Cash paid for interest

$
—

$
659

Cash received from income tax refunds

$
7,917

$
—

Operating lease payments made (Note 7)

$
287

$
—

Adoption of ASC Topic 842 (non-cash transaction, see Note 7)

$
1,341

$
—


	Six Months Ended July 31,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	4,806	$	(28,933)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Deferred income tax expense (benefit)		8,536		(6,722)
Depreciation		1,858		1,711
Stock compensation expense		1,414		926
Lease expense		793		382
Amortization of purchased intangible assets		451		592
Changes in accrued interest on short-term investments		295		299
Impairment loss		—		2,072
Other		104		43
Changes in operating assets and liabilities
Accounts receivable		7,532		(9,835)
Contract assets		6,856		6,615
Other assets		(17,781)		2,722
Accounts payable and accrued expenses		4,714		(16,445)
Contract liabilities		83,323		(6,591)
Net cash provided by (used in) operating activities		102,901		(53,164)

CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of short-term investments		145,000		104,000
Purchases of short-term investments		(10,000)		(35,000)
Purchases of property, plant and equipment		(1,133)		(3,043)
Net cash provided by investing activities		133,867		65,957

CASH FLOWS FROM FINANCING ACTIVITIES
Payments of cash dividends		(23,499)		(7,803)
Proceeds from the exercise of stock options		725		1,567
Net cash used in financing activities		(22,774)		(6,236)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH		1,067		(165)
NET INCREASE IN CASH AND CASH EQUIVALENTS		215,061		6,392
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		167,363		164,318
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	382,424	$	170,710

SUPPLEMENTAL CASH FLOW INFORMATION (Notes 7 and 10)

The accompanying notes are an integral part of these condensed consolidated financial statements.

ARGAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~JULY 31, 2019~~

July 31, 2020

(Tabular dollar amounts in thousands, except per share data)

(Unaudited)

NOTE 1 —– DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Description of the Business

Argan, Inc. (“Argan”) conducts operations through its wholly-owned subsidiaries, Gemma Power Systems, LLC and affiliates (“GPS”); The Roberts Company, Inc. (“TRC”); Atlantic Projects Company Limited and affiliates (“APC”); and Southern Maryland Cable, Inc. (“SMC”). Argan and these consolidated subsidiaries are hereinafter collectively referred to as the “Company.”

Through GPS and APC, the Company provides a full range of engineering, procurement, construction, commissioning, operations management, maintenance, project development, technical and other consulting services to the power generation ~~and~~market, including the renewable energy ~~markets.~~sector. The wide range of customers includes independent power producers, public utilities, power plant equipment suppliers and global energy plant construction ~~firms.~~firms with projects located in the continental United States (the “US”), the Republic of Ireland (“Ireland”) and the United Kingdom (the “UK”). Including consolidated ~~joint ventures and~~ variable interest entities (“VIEs”), GPS and APC represent the Company’s power industry services reportable segment. Through TRC, the industrial fabrication and field services reportable segment provides on-site services that support maintenance turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the ~~southern United States~~southeast region of the US and that are based on its expertise in producing, delivering and installing fabricated ~~steel~~metal components such as piping systems and pressure ~~vessels and heat exchangers.~~vessels. Through SMC, which conducts business as SMC Infrastructure Solutions, the telecommunications infrastructure services segment provides project management, construction, installation and maintenance services to commercial, local government and federal government customers primarily in the mid-Atlantic region of the ~~United States.~~US.

Basis of Presentation and Significant Accounting Policies

The condensed consolidated financial statements include the accounts of Argan, its wholly-owned subsidiaries and ~~any VIEs for which the Company is deemed to be the primary beneficiary.~~its financially controlled VIEs. All significant inter-company balances and transactions have been eliminated in consolidation. ~~Certain amounts in the condensed consolidated balance sheet for the prior year-end were reclassified to conform to the current period-end presentation.~~

In Note 14, the Company has provided certain financial information relating to the operating results and assets of its reportable segments based on the manner in which management disaggregates the Company’s financial reporting for purposes of making internal operating decisions. ~~In Note 13, the Company has provided certain financial information related to concentrations of businesses and customers.~~ The Company’s fiscal year ends on January 31 of each year.

The condensed consolidated balance sheet as of July 31, 2020, the condensed consolidated statements of earnings and stockholders’ equity for the three and six months ended July 31, 2020 and 2019, and the condensed consolidated statements of cash flows for the six months ended July 31, 2020 and 2019 are unaudited. The condensed consolidated balance sheet as of January 31, 2020 has been derived from audited financial statements. These condensed consolidated financial statements have been prepared ~~in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and~~ pursuant to the rules and regulations of the US Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with ~~U.S. GAAP~~accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The accompanying condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements, the notes thereto, and the independent registered public accounting firm’s report thereon, that are included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, ~~2019.~~2020 (“Fiscal 2020”).

The condensed consolidated balance sheet as of July 31, 2019, the condensed consolidated statements of earnings and stockholders’ equity for the three and six months ended July 31, 2019 and 2018, and the condensed consolidated statements of cash flows for the six months ended July 31, 2019 and 2018 are unaudited. The condensed consolidated balance sheet as of January 31, 2019 has been derived from audited financial statements. 6

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, which are of a normal and recurring nature, considered necessary to present fairly the financial position of the Company as of July 31, ~~2019,~~2020, and its earnings and cash flows for the interim periods presented. The results of operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

Accounting Policies

~~Effective February 1,~~In December 2019, ~~the Company adopted Accounting Standards Update (“ASU”) 2016-02,~~ ~~“Leases,”~~ as amended, which herein is referred to as “ASC Topic 842.” Accordingly, operating leases with lease terms of more than twelve (12) months have been presented in the condensed consolidated balance sheet as of July 31, 2019 by adding assets for the rights-of-use and liabilities for the obligations that are created by these leases (see Note 7). The Company elected to apply the transition requirements at the adoption date rather than at the beginning of the earliest comparative period presented herein. There was no cumulative effect adjustment that had to be made to retained earnings at the adoption date, and prior year consolidated financial statements were not restated. The new accounting for leases did not have a material effect on the Company’s operating results for the three and six months ended July 31, 2019.

~~Effective February 1, 2018, the Company adopted ASU 2014-09, “~~~~Revenue from Contracts with Customers~~,” as amended, which herein is referred to as “ASC Topic 606”, using the permitted modified retrospective method. Accordingly, the new guidance was applied retrospectively to contracts that were not completed as of the adoption date. Financial results for the reporting periods which are included herein have been presented in accordance with the new guidance of ASC Topic 606 (see Note 2). The effect of the adoption on retained earnings as of February 1, 2018 was an income tax-effected increase of less than $0.1 million.

~~In 2016,~~ the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes, which, among other changes, eliminates the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the expected loss for the entire year. In these instances, the estimated annual effective income tax rate shall be used to calculate the tax without limitation. The new standard also requires the recognition of a franchise (or similar) tax that is partially based on income as an income-based tax and the recording of any incremental tax that is incurred by the Company as a non-income based tax. The requirements of this new guidance, effective for the Company on February 1, 2021, are not expected to alter the Company’s current accounting for income taxes.

In 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The ~~scope~~requirements of this new standard ~~covers,~~cover, among other provisions, the methods that businesses shall use to estimate amounts of uncollectible notes and accounts receivable. ~~As subsequently amended, the Company does not expect that the requirements~~Adoption of this new guidance, which ~~becomes~~became effective for the Company on February 1, 2020, ~~will materially~~did not affect ~~its~~the Company's consolidated financial statements.

There are no other recently issued accounting pronouncements that have not yet been adopted that the Company considers material to its condensed consolidated financial statements.

The carrying value amounts presented in the condensed consolidated balance sheets for the Company’s current assets, which primarily include cash and cash equivalents, short-term investments, accounts receivable and contract assets, and its current liabilities are reasonable estimates of their fair values due to the short-term nature of these items.

Variable Interest Entity

In January 2018, the Company was deemed to be the primary beneficiary of a VIE that is performing the project development activities ~~for~~related to the planned construction of a new natural gas-fired power plant. Consideration for the Company’s engineering and financial support includes the right to build the power plant pursuant to a turnkey engineering, procurement and construction (“EPC”) services contract that has been negotiated and announced. The account balances of the VIE are included in the condensed consolidated financial statements, including development costs incurred by the VIE during the three and six-month periods ended July 31, ~~2019~~2020 and ~~2018.~~2019. The total amounts of the project development costs included in the balances for property, plant and equipment as of July 31 and January 31, ~~2019~~2020 were ~~$4.0~~$7.3 million and $2.1 million, respectively. At July 31 and January 31, 2019, the total amounts of notes receivable from the VIE and related accrued interest, which amounts are eliminated in consolidation, were $4.2 million and $2.1$6.9 million, respectively.

NOTE 2 —– REVENUES FROM ~~CONTRACT~~CONTRACTS WITH CUSTOMERS

The ~~new standard outlines~~Company's recognition of revenues under contracts with customers is based on a single comprehensive five-step model ~~for entities to use in accounting for revenues arising from contracts with customers~~ that requires reporting entities to:

Identify the contract,

Identify the performance obligations of the contract,

Determine the transaction price of the contract,

Allocate the transaction price to the performance obligations, and

Recognize revenue.

1. ~~Identify the contract,~~

2. ~~Identify the performance obligations of the contract,~~

3. ~~Determine the transaction price of the contract,~~

4. ~~Allocate the transaction price to the performance obligations, and~~

5. ~~Recognize revenue.~~

~~The Company focuses on the transfer of the contractor’s control of the goods and/or services to the customer, as opposed to the transfer of risk and rewards.~~ Major provisions of the ~~new~~ standard cover the determination of which goods and services are distinct and represent separate performance obligations, the ~~appropriate treatments for variable consideration, and the~~ evaluation of whether revenues should be recognized at a point in time or over ~~time.~~

~~When a performance obligation is satisfied over~~ time, and the ~~related revenues are also recognized over time. Most of the~~appropriate treatment for variable consideration.

The Company’s revenues are recognized primarily under various types of long-term construction contracts, including those for which revenues are based on either a ~~fixed price~~fixed-price or a ~~time and materials~~time-and-materials basis, and primarily recognized over time as performance obligations are satisfied due to the continuous transfer of control to the project owner or other customer. Revenues from ~~fixed price~~fixed-price contracts, including a portion of estimated gross profit, are recognized as services are provided, based on costs incurred and estimated total contract costs using the percentage-of-completion method. If, at any time, the estimate of contract profitability indicates an anticipated loss on a contract, the Company will recognize the total loss in the reporting period that it is identified and an amount is estimable. Revenues from ~~time and materials~~time-and-materials contracts are recognized when the related services are provided to the customer.

~~Most~~Almost all of the Company’s ~~long-term~~fixed-price contracts are considered to have a single performance obligation. Although multiple promises to transfer individual goods or services may exist, they are not typically distinct within the context of ~~the applicable~~such contracts because contract ~~because the contract~~ promises included therein are interrelated or ~~they~~the contracts require the Company to perform critical integration so that the customer receives a completed project. The Company’s accounting for its assurance-type warranties provided under contracts with customers is conducted in accordance with the specific professional guidance established to cover such arrangements.

The transaction price for a contract represents the accounting value of the contract awarded to the Company that is used to determine the amount of revenues recognized as of the balance sheet date. It may reflect amounts of variable consideration, which could be either increases or decreases to the transaction price. These adjustments can be made from time-to-time during the period of contract performance as circumstances evolve related to such items as ~~variations~~changes in the scope and price of contracts, claims, incentives and liquidated damages.

Contract assets ~~are defined in the new standard to~~generally include amounts that represent the rights to receive payment for goods or services that have been transferred to the project owner, with the rights conditional upon something other than the passage of time. Contract liabilities ~~are defined in the new standard to~~generally include the amounts that reflect obligations to provide goods or services for which payment has been received. ~~In addition, the definition~~The balances of accounts receivable ~~has been restated to effectively~~ exclude billed amounts ~~retained~~which, pursuant to the terms of the applicable contract, are not paid by project owners until a defined phase of a contract or project has been completed and accepted. ~~Retentions were historically included in accounts receivable, but~~These retained amounts are ~~now~~ reflected in contract assets or contract liabilities depending on the net contract position of the particular contract. Retention amounts and the length of retention periods may vary. ~~Retainage~~Retention amounts related to active contracts are considered current regardless of the term of the applicable contract; such amounts are generally collected by the completion of the applicable contract. The total of amounts retained by project owners under construction contracts at July 31 and January 31, ~~2019~~2020 were ~~$15.8~~$27.2 million and ~~$15.3~~$20.0 million, respectively.

Variable Consideration

~~Contract~~Amounts for contract variations for which the Company has project-owner directive for additional work or other scope change, but not for the price associated with the corresponding additional effort, are included in the transaction price ~~and are reflected in revenues~~ when it is considered probable that the applicable costs will be recovered through a modification to the contract price. The aggregate amount of such contract variations included in the transaction prices that were used to determine project-to-date revenues at July 31 and January 31, 2019, were $22.8 million and $18.8 million, respectively. The effects of any revision to a transaction price can be determined at any time and they could be material. The Company may include in the corresponding transaction price a portion of the amount claimed in a dispute that it expects to receive from a project owner. Once a settlement of the dispute has been reached with the project owner, the transaction price may be revised again to reflect the final resolution. The aggregate amount of such contract variations included in the transaction prices that were used to determine project-to-date revenues at July 31, 2020 and January 31, 2020 were $8.9 million and $20.6 million, respectively. Variations related to the Company’s contracts typically represent modifications to the existing contracts and performance obligations, and do not represent new performance obligations. Actual costs related to any changes in the scope of the corresponding contract are expensed as they are incurred. Changes to total estimated contract costs and losses, if any, are reflected in operating results for the period in which they are determined.

The Company’s long-term contracts typically have schedule dates and other performance objectives that if not achieved could subject the Company to liquidated damages. These contract requirements generally relate to specified activities that must be completed by an established date or by the achievement of a specified level of output or efficiency. Each applicable contract defines the conditions under which a project owner may be entitled to liquidated damages. At the outset of each of the Company’s contracts, the potential amounts of liquidated damages typically are not constrained, or subtracted, from the transaction price as the Company believes that it has included activities in its contract plan, and the associated costs, that will be effective in preventing such damages. Of course, circumstances may change as the Company executes the corresponding contract.

The transaction price is reduced by an applicable amount when the Company no longer considers it probable that a future reversal of revenues will not occur when the matter is resolved. The Company considers potential liquidated damages, the costs of other related items and potential mitigating factors in determining the adequacy of its regularly updated estimates of the amounts of gross profit expected to be earned on active projects. ~~In other cases, the Company may have the grounds to~~

assert liquidated damages against subcontractors, suppliers, project owners or other parties related to a project. Such circumstances may arise when the Company’s activities and progress are adversely affected by delayed or damaged materials, challenges with equipment performance or other events out of the Company’s control where the Company has rights to recourse, typically in the form of liquidated damages. In general, the Company does not adjust the corresponding contract accounting until it is probable that the favorable cost relief will be realized. Such adjustments have been and could be material.

The Company records adjustments into revenues and profits on contracts, including those associated with contract variations and estimated cost changes, using a cumulative catch-up method. Under this method, the impact of an adjustment to the amount of revenues recognized to date is recorded in the period that the adjustment is identified. Estimated variable consideration amounts are determined by the Company based primarily on the single most likely amount in the range of possible consideration amounts. Revenues and profits in future periods of contract performance are recognized using the adjusted amounts of transaction price and estimated contract costs.

Accounting for the Loss Subcontract

In its Form 10-K Annual Report for the year ended January 31, 2019 (“Fiscal 2019”), the Company disclosed that APC iswas completing the mechanical installation of the boiler for a ~~power-plant~~biomass-fired power plant under construction ~~project~~ in ~~the United Kingdom~~Teesside, England (the “TeesREP Project”) that ~~has~~had encountered significant operational and contractual ~~challenges, and that the~~challenges. The consolidated operating results for the year ended January 31, 2019 reflected unfavorable gross profit adjustments related to this project. The disclosure explained that the construction project ~~progress~~ was behind the schedule originally established for the job and warned that the ~~project~~TeesREP Project may continue to impact the Company’s consolidated operating results negatively until it reaches completion.

Subsequent to the release of the Company’s consolidated financial statements for ~~the fiscal year ended January 31,~~Fiscal 2019, APC’s estimates of the costs of the unfavorable financial impacts of the difficulties on ~~this particular project located in Teesside, England (the “TeesRep” project), including increased scope and design changes from original plans and work stoppages due to labor strikes, have~~the TeesREP Project escalated substantially. For the three-month period ended April 30, 2019, the Company recorded a loss related to this project in the amount of $27.6 million and reversed profit in the amount of $0.7 million that had been recorded in prior periods. For the three-month period ended July 31, 2019, APC ~~has conducted comprehensive reviews~~recorded additional loss related to the TeesREP Project in the amount of ~~the remaining contract work, prepared new timelines for the completion of the project and assessed other factors.~~$3.4 million. Based on ~~the completed~~ analyses that have been continually updated since then, management currently expects that the forecasted costs at completion for ~~APC at contract completion~~the TeesREP Project will exceed projected revenues by approximately ~~$30.9 million.~~

~~The total~~$32.3 million, which is the amount of the expected loss ~~on this project~~that has been reflected in the condensed consolidated financial statements as of July 31, 2020.

Construction activities on the TeesREP Project were suspended on March 24, 2020 due to the COVID-19 pandemic. At that time, APC had completed approximately 90% of its subcontracted work. As a condition for resuming its efforts on the TeesREP Project, APC entered into an amendment to the subcontract with its customer, effective June 1, 2020, covering the various terms and conditions for completion of the installation of the boiler (“Amendment No. 2”). The agreement represents a global settlement of past commercial differences with both parties making significant concessions, and converts the billing arrangements for the ~~six~~remaining work to a time-and-materials basis.

Despite the change to the billing arrangements, Amendment No. 2 has been treated as a modification of the original subcontract as the arrangement continues to represent a single performance obligation to its customer, the delivery of a complete functioning and integrated boiler, that was only partially satisfied when the modification to the subcontract occurred. Accordingly, the accounting for the modification of the subcontract resulted in a reduction to the subcontract loss, recorded during the three months ended July 31, ~~2019.~~ 2020, in the approximate amount of $4.2 million. Additionally, project-related adjustments in the total amount of approximately $1.9 million were made to the accounts of APC for the three months ended July 31, 2020, associated primarily with the unexpected complexity of the UK works and the current year suspension and restart of the construction activities, which represented primarily charges to costs of revenues.

The amount of the ~~contract~~remaining subcontract loss reserve ~~approximately $7.3 million~~ as of July 31, ~~2019, has been~~2020 was approximately $2.3 million; the comparable balance at January 31, 2020 was $5.8 million. These balances were included in accrued expenses in the accompanying condensed consolidated balance ~~sheet. An effect~~sheets. The total amounts of ~~changes that the Company has made during the six-month period ended July 31, 2019 to transaction prices~~accounts receivable and ~~to estimates of the costs-to-complete active contracts, including those changes~~contract assets related to the ~~loss contract~~TeesREP Project and included in the condensed consolidated balance sheets were $11.2 million as of ~~APC, was a net reversal~~July 31, 2020 and $19.2 million as of ~~approximately $1.4 million in revenues that were recognized in prior years.~~January 31, 2020.

Remaining Unsatisfied Performance Obligations (“RUPO”)

The amount of RUPO represents the unrecognized revenue value of active contracts with customers as determined under ~~ASC Topic 606.~~the revenue recognition rules of US GAAP. Increases to RUPO during a reporting period represent the transaction prices associated with new contracts, as well as additions to the transaction prices of existing contracts. The amounts of such changes may vary significantly each reporting period based on the timing of major new contract awards and the occurrence and assessment of contract variations.

At July 31, ~~2019,~~2020, the Company had RUPO of ~~$57.5 million, most~~$694.1 million. The largest portion of ~~which~~RUPO at any date usually relates to EPC service contracts with typical performance durations of 2 to 3 years. However, the length of certain significant construction projects may exceed three years. The Company estimates that approximately 31% of the RUPO amount at July 31, 2020 will be included in the amount of consolidated revenues that will be recognized during the final two quarters of the fiscal year ending January 31, 2021 (“Fiscal 2021”). Most of the remaining amount of the RUPO at July 31, 2020 is expected to be recognized asin revenues ~~during~~over the ~~year ending January~~following two fiscal years. Revenues for future periods will also include amounts related to customer contracts started or awarded subsequent to July 31, 2020. ~~Although the amount of reported RUPO represents business that is considered to be firm, it~~It is important to note that estimates may be changed in the future and that cancellations, deferrals, or scope adjustments may ~~occur.~~occur related to work included in RUPO at July 31, 2020. Accordingly, RUPO may be adjusted to reflect ~~any known~~ project delays and cancellations, revisions to project scope and cost and foreign currency exchange fluctuations, ~~and project deferrals,~~or to revise estimates, as ~~applicable.~~effects become known. Such adjustments may materially reduce future revenues below Company estimates.

Disaggregation of Revenues

The consolidated revenues are disaggregated by reportable segment in Note 14 to the condensed consolidated financial statements. The amounts of revenues earned under fixed-price contracts during the six-month periods ended July 31, 2019 and 2018, were approximately 74% and 90%, respectively, of the corresponding consolidated revenues for the periods.

The following table presents consolidated revenues for the three and six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, disaggregated by the geographic area where the ~~work was performed:~~corresponding projects were located:

	Three Months Ended July 31,				Six Months Ended July 31,
	2019		2018		2019		2018

									Three Months Ended				Six Months Ended
									July 31,				July 31,
									2020		2019		2020		2019
United States	$	37,650	$	108,939	$	77,416	$	233,093	$	83,510	$	37,650	$	132,375	$	77,416
United Kingdom	19,618		19,690		25,282		34,158			2,540		19,618		12,836		25,282
Republic of Ireland	5,748		7,415		9,751		10,159			1,442		5,748		2,429		9,751
Other	43		626		154		626			—		43		—		154
Consolidated Revenues	$	63,059	$	136,670	$	112,603	$	278,036	$	87,492	$	63,059	$	147,640	$	112,603

Each year, the majority of consolidated revenues are recognized pursuant to fixed-price contracts with most of the remaining portions earned pursuant to time-and-material contracts. Consolidated revenues are disaggregated by reportable segment in Note 14 to the condensed consolidated financial statements.

NOTE 3 —– CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

At July 31 and January 31, ~~2019, a~~2020, significant ~~amount~~amounts of cash and cash equivalents ~~was~~were invested in a mutual fund with net assets invested in high-quality money market instruments. Such investments include ~~U.S.~~US Treasury obligations; obligations of ~~U.S. Government~~US government agencies, authorities, instrumentalities or sponsored enterprises; and repurchase agreements secured by ~~U.S. Government~~US government obligations. Due to market conditions, returns on money market instruments are currently minimal. The Company considers all liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

Short-term investments as of July 31 and January 31, ~~2019~~2020 consisted solely of certificates of deposit purchased from Bank of America (the “Bank”) with weighted average initial maturities of ~~246~~194 days and ~~250~~165 days, respectively (the “CDs”). The Company has the intent and ability to hold the CDs until they mature, and they are carried at cost plus accrued interest which approximates fair value. The total carrying value amounts as of July 31 and January 31, ~~2019~~2020 included accrued interest of ~~$0.9~~$0.2 million and ~~$1.2~~$0.5 million, respectively. Interest income is recorded when earned and is included in other income. At July 31 and January 31, ~~2019,~~2020, the weighted average annual interest rates of the outstanding CDs were ~~2.7%~~1.6% and ~~2.6%~~1.8%, respectively.

In addition, the Company has a substantial portion of its cash on deposit in the US at the Bank in excess of federally insured limits. Management does not believe that ~~maintaining substantially all such assets~~the combined amount of the CD investments and the cash deposited with the Bank represents a material risk. The Company also maintain certain Euro-based bank accounts in Ireland and certain pound sterling-based bank accounts in the UK in support of the operations of APC.

NOTE 4 —– ACCOUNTS AND NOTES RECEIVABLE

AtThe Company generally extends credit to a customer based on an evaluation of the customer’s financial condition without requiring tangible collateral. Exposure to losses on accounts and notes receivable is expected to differ due to the varying financial condition of each customer. The Company monitors its exposure to credit losses and may establish an allowance for a credit loss based on management’s estimate of the loss that is expected to occur over the remaining life of the particular financial asset. As of July 31, ~~and January 31, 2019,~~2020, there were outstanding invoices billed to one former customer and unbilled costs incurred on the related project, with balances included in accounts receivable and contract assets, in the aggregate ~~amounts~~amount of ~~$19.6~~$24.5 million, ~~and $17.1 million, respectively,~~ for which the ~~collection~~recovery time will most likely depend on the resolution of the outstanding legal dispute between the parties (see Note 8). At July 31 and January 31, ~~2019, Company’s allowance for uncollectible accounts was~~2020, the amounts of credit losses expected by management were insignificant. The amounts of the provision for credit losses for the three and six months ended July 31, 2020 and the provision for uncollectible accounts ~~and notes receivable~~ for the three and six months ended July 31, 2019 ~~and 2018~~ were also insignificant.

NOTE 5 —– PURCHASED INTANGIBLE ASSETS

At both July 31, 2020 and January 31, 2020, the goodwill balances related to the acquisitions of GPS and TRC were $18.5 million and $9.5 million, respectively. Primarily due to the significant reduction of the fair value of the business of APC deemed to have occurred ~~in connection with~~as a result of the substantial contract loss discussed in Note 2 above, the Company recorded an impairment loss in the first quarter ended April 30, 2019 in the amount of $2.1 million, which was the remaining balance of goodwill ~~included in the condensed consolidated balance sheet as of January 31, 2019~~ associated with APC. ~~At July 31 and January 31, 2019, the goodwill balances related to the acquisitions of GPS and TRC were $18.5 million and $12.3 million, respectively. No~~NaN other changes were made to the balances of goodwill during the ~~six months~~six-month periods ended July 31, ~~2019~~2020 or ~~2018.~~ 2019. Management does not believe that any events or circumstances that have occurred or arisen since January 31, 2020 require an updated assessment of the goodwill balances of either GPS or TRC.

The Company’s p~~urchased~~purchased intangible assets, other than goodwill, consisted of the following elements as of July 31 and January 31, ~~2019:~~2020:

July 31, 2019

January 31,

Estimated
Useful Life

Gross
Amount

Accumulated
Amortization

Net
Amount

2019 (net
amount)

Trade names

15 years

$
8,323

$
4,261

$
4,062

$
4,424

Process certifications

7 years

1,897

994

903

1,039

Customer relationships

4-10 years

1,346

766

580

674

Totals

$
11,566

$
6,021

$
5,545

$
6,137


		July 31, 2020						January 31,
	Estimated	Gross		Accumulated		Net		2020, (net
	Useful Life	Amounts		Amortization		Amount		amounts)
Trade names	15 years	$	8,142	$	4,714	$	3,428	$	3,699
Process certifications	7 years		1,897		1,264		633		768
Customer relationships	4-10 years		1,346		857		489		534
Totals		$	11,385	$	6,835	$	4,550	$	5,001

NOTE 6 —– FINANCING ARRANGEMENTS

The Company maintains financing arrangements with the Bank that are described in an Amended and Restated Replacement Credit Agreement (the “Credit Agreement”), dated May 15, 2017. The Credit Agreement provides a revolving loan with a maximum borrowing amount of $50.0 million that is available until May 31, 2021 with interest at the 30-day ~~LIBOR~~London Interbank Offered Rate (“LIBOR”) plus 2.0%. The Company may also use the borrowing ability to cover other credit instruments issued by the Bank for the Company’s use in the ordinary course of business. AtAs of July 31 and January 31, ~~2019,~~2020, the Company had letters of credit outstanding under the Credit Agreement, but no 0 borrowings, in the approximate amounts of ~~$12.3~~$1.7 million and ~~$15.2~~$9.9 million, ~~respectively, that relate substantially to~~respectively. Additionally, in support of the ~~TeesREP~~current project ~~(see~~development activities of the VIE described in Note ~~2).~~ 1, the Bank issued a letter of credit, outside the scope of the Credit Agreement, in the amount of $3.4 million for which the Company has provided cash collateral.

The Company has pledged the majority of its assets to secure its financing arrangements. The Bank’s consent is not required for acquisitions, divestitures, cash dividends or significant investments as long as certain conditions are met. The Bank requires that the Company comply with certain financial covenants at its fiscal year-end and at each of its fiscal quarter-ends. The Credit Agreement also includes other terms, covenants and events of default that are customary for a credit facility of its size and nature. As of July 31 and January 31, ~~2019,~~2020, the Company was ~~compliant~~in compliance with the financial ~~covenants of the Credit Agreement.~~covenants.

NOTE 7 —– COMMITMENTS

Leases

~~Management~~The Company determines if a contract is or contains a lease at inception or upon modification of the contract. A contract is or contains a lease if ~~the contract~~it conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. The Company ~~has made the election, as permitted by the new standard,~~does not to apply ~~the new~~this accounting to those leases with terms of twelve (12) months or less and that do not include options to purchase the underlying assets that the Company is reasonably certain to exercise. In addition, the Company has chosen not to separate non-lease components from their related lease components. Finally, the Company elected to utilize the package of permitted practical expedients that, upon adoption of ASC Topic 842, allows entities to not reassess whether any existing contracts are or contain leases.

The Company’s operating leases primarily cover office space that expire on various dates through May ~~2024; it has no finance leases.~~2024 and certain equipment used by the Company in the performance of its construction services contracts. Other construction equipment is rented, with periods of expected usage less than one year, or owned. Certain leases contain renewal ~~options. Renewal periods~~options, which are included in ~~the~~ expected lease ~~term~~terms if they are reasonably certain of being exercised by the Company. Other equipment leases are embedded in broader arrangements with subcontractors or construction equipment suppliers. The Company has no finance leases.

None of the ~~Company’s~~ operating leases include significant amounts for incentives, rent holidays ~~penalties,~~ or price escalations. Under certain lease agreements, the Company is obligated to pay property taxes, insurance, and maintenance costs.

Operating lease right-of-use assets and associated lease liabilities are recognized in the balance sheet at the lease commencement date based on the present value of future minimum lease payments to be made over the expected lease term. As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental borrowing rate ~~based on~~(LIBOR plus 2.0%) at the ~~information available at~~ commencement date in determining the present value of future payments. The expected lease term includes an option to extend or to terminate the lease when it is reasonably certain that the Company will exercise such option.

Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term. Operating lease expense amounts for the six months ended July 31, 2020 and 2019 ~~was $0.3 million.~~were $0.8 million and $0.4 million, respectively. Operating lease payments for the six months ended July 31, 2020 and 2019 were $0.8 million and $0.4 million, respectively. For operating leases as of July 31, ~~2019,~~2020, the weighted average lease term ~~was 42~~is 34 months and the weighted average discount rate is 3.4%.

The Company also uses equipment and occupies facilities under short-term rental agreements. Rent expense amounts incurred under operating leases and short-term rental agreements (including portions of the lease expense amounts disclosed above) and included in costs of revenues for the three and six months ended July 31, 2020 were $1.4 million and $2.0 million, respectively. Rent expense incurred under these types of arrangements and included in costs of revenues for the three and six months ended July 31, 2019 was ~~4.5%.~~ $1.3 million and $2.3 million, respectively. Rent expense incurred under these types of arrangements (including portions of the lease expense amounts disclosed above) and included in selling, general and administrative expenses for the three months ended July 31, 2020 and 2019 was $0.2 million for both periods. Rent expense incurred under these types of arrangements and included in selling, general and administrative expenses for the six months ended July 31, 2020 and 2019 was $0.4 million for both periods.

The following is a schedule of future minimum lease payments for the operating leases that were recognized in the condensed consolidated balance sheet as of July 31, ~~2019:~~

Year ending January 31,

Remainder of 2020

$
266

2021

283

2022

210

2023

187

2024

113

Thereafter

30

Total lease payments

1,089

Less interest portion

55

Present value of lease payments

1,034

Less current portion (included in accrued expenses)

418

Non-current portion

$
616

~~The Company also uses equipment and occupies other facilities under cancelable or short-term rental agreements. Rent expense amounts incurred under~~2020, including operating leases ~~and short-term rental agreements (including a portion of the lease expense amount disclosed above) and included in costs of revenues for~~added during the three and six months ended July 31, ~~2019 were $1.3~~2020 in the amounts of approximately $1.1 million and ~~$2.3~~$1.5 million, ~~respectively. Rent expense~~respectively, covering primarily certain construction-site assets required by GPS:


Years Ending January 31,
Remainder of 2021	$	892
2022		1,396
2023		769
2024		242
2025		85
Thereafter		20
Total lease payments		3,404
Less interest portion		156
Present value of lease payments		3,248
Less current portion (included in accrued expenses)		2,742
Non-current portion	$	506

The future minimum lease payments presented above include amounts ~~incurred~~due under ~~these types~~a long-term lease covering the primary offices and plant for TRC with the founder and current chief executive officer of ~~arrangements (including a portion~~TRC at an annual rate of the lease expense amount disclosed above) and included in selling, general and administrative expenses for the three and six months ended July 31, 2019 were $0.2 million and $0.4 million, respectively. Rent expense amounts incurred on construction projects and included in the costs of revenues for the three and six months ended July 31, 2018 were approximately $3.4 million and $8.2 million, respectively. Rent expense amounts included in selling, general and administrative expenses for the three and six months ended July 31, 2018 were $0.1 million and $0.3 million ~~respectively.~~through April 30, 2021.

Performance Bonds and Guarantees

In the normal course of business and for certain major projects, the Company may be required to obtain surety or performance bonding, to cause the issuance of letters of credit, or to provide parent company guarantees (or some combination thereof) in order to provide performance assurances ~~and guarantees~~ to clients on behalf of its ~~wholly-owned subsidiaries on various major projects.~~contractor subsidiaries. As these subsidiaries are wholly-owned, any actual liability is ordinarily reflected in the financial statement account balances determined pursuant to the Company’s accounting for contracts with customers. When sufficient information about claims on guaranteed or bonded projects would be available and monetary damages or other costs or losses would be determined to be probable, the Company would record such losses. Any amounts that may be required to be paid in excess of the estimated costs to complete contracts in progress as of July 31, 2020 are not estimable. Argan has provided a parent company performance guarantee and has caused a performance bond to be issued to the ~~Bank to issue certain letters of credit (see Note 6) to Técnicas Reunidas (“TR”), the engineering, procurement and construction~~EPC services ~~(“EPC”)~~ contractor on the TeesREP ~~Biomass Power Station~~ Project, on behalf of APC, a major ~~subcontractor~~subcontractor.

As of July 31, 2020, the Company has also provided a financial guarantee, subject to TRcertain terms and conditions, on behalf of GPS to an original equipment manufacturer in the amount of $3.6 million in support of business development efforts which did result in the award of an EPC services contract to GPS for the construction of a gas-fired plant project in March 2020. The fair value of this ~~project.~~guarantee at July 31, 2020 is considered to be immaterial.

Warranties

The Company generally provides assurance-type warranties for work performed under its construction ~~contracts which do not represent separate performance obligations.~~contracts. The warranties cover defects in equipment, materials, design or workmanship, and most warranty periods typically run from nine to twenty-four months after the completion of construction on a particular project. Because of the nature of the Company’s projects, including project owner inspections of the work both during construction and prior to substantial completion, the Company has not experienced material unexpected warranty costs in the past. Warranty costs are estimated based on ~~the Company’s~~ experience with the type of work and any known risks relative to each completed project. The accruals of liabilities, which are established to cover estimated future warranty costs, are recorded ~~over~~as the ~~terms of the related contracts~~contracted work is performed, and they are included in the amounts of accrued expenses in the condensed consolidated balances sheets. The ~~corresponding liabilities are~~liability amounts may be periodically adjusted to reflect changes in the ~~amounts~~estimated size and number of ~~estimated~~ expected warranty claims.

NOTE 8 —– LEGAL ~~MATTERS~~CONTINGENCIES

In the normal course of business, the Company may ~~also~~ have pending claims and legal proceedings. ~~It is~~In the opinion of management, based on information available at this time, ~~that~~ there are no current claims and proceedings that could have a material adverse effect on the ~~Company’s~~ condensed consolidated financial statements except for the matter described below.

In January 2019, GPS filed a lawsuit against Exelon West Medway II, LLC and Exelon Generation Company, LLC (together referred to as “Exelon”) for Exelon’s breach of contract and failure to remedy various conditions which negatively impacted the schedule and the costs associated with the construction by GPS of a gas-fired power plant for Exelon in Massachusetts. ~~Nonetheless,~~As a result, the Company believes that Exelon has received the benefits of the construction efforts of GPS ~~continued~~and the corresponding progress made on the project without making payments to ~~perform~~GPS for the ~~efforts required by the contract to complete the project. On~~value received (see Note 4). In March 7, 2019, Exelon provided GPS with a notice intending to terminate the EPC contract under which GPS had been providing services to Exelon. At that time, the construction project was nearly complete and both of the power generation units included in the plant had successfully reached first fire. The completion of various prescribed performance tests and the clearance of punch-list items were the primary tasks necessary to be accomplished by GPS in order to achieve substantial completion of the power plant.

~~Among~~ Nevertheless, and among other actions, Exelon ~~issued a~~provided contractual notice requiring GPS to vacate the construction ~~site, made claims against~~site. Exelon has asserted that GPS failed to fulfill certain obligations under the contract and ~~has withheld~~was in default, withholding payments from GPS on invoices rendered to Exelon in accordance with the terms of the ~~EPC~~ contract between the parties. In summary, the Company’s position is that Exelon wrongfully terminated GPS, materially breached the contract and received the benefits of the construction without making payments to GPS for the value received.

With vigor, GPS intends to continue to assert its rights under the EPC contract, to pursue the collection ~~from Exelon~~ of amounts owed under the EPC contract ~~(see Note 4)~~ and ~~to continue~~ to defend itself against ~~Exelon’s~~the allegations that GPS did not perform in accordance with the contract. ~~The legal process~~During Fiscal 2021, most of the ~~lawsuit filed~~litigation activities of the legal teams has focused on pre-trial preparations. The difficulties experienced by ~~GPS has begun as~~ the ~~parties recently agreed~~legal teams in completing certain discovery activities, due in part to COVID-19 restrictions, resulted in the court granting an additional extension of the discovery ~~and confidentiality protocols.~~closing date to on or about October 2, 2020.

NOTE 9 —– STOCK-BASED COMPENSATION

The Company’s board of directors may make awards under the 2011 Stock Plan (the ~~“Stock~~“2011 Plan”) or the 2020 Stock Plan (the “2020 Plan”) to officers, directors and key ~~employees.~~employees (together, the “Stock Plans”). On June 23, 2020, the Company’s stockholders approved the adoption of the 2020 Plan, and the allocation of 500,000 shares of the Company’s common stock for issuance thereunder, which had been established by the Company’s board of directors earlier in the current year. The 2020 Plan will serve to replace the 2011 Plan; the Company’s authority to make awards pursuant to the 2011 Plan will expire on July 19, 2021.

The features of the 2020 Plan are similar to those included in the 2011 Plan. Awards may include nonqualified stock options (“NSOs”), incentive stock options (“ISOs”), ~~nonqualified stock options (“NSOs”),~~ and restricted or unrestricted stock. The specific provisions for each award made pursuant to the terms of the Stock Plans are documented in a written agreement between the Company and the awardee. All stock options awarded under the Stock ~~Plan~~Plans shall have an exercise price per share at least equal to the common stock’s market value ~~per share at~~on the date of grant. ~~ISOs~~Stock options shall have ~~a term~~terms no longer than ten ~~years; NSOs may have up to a ten-year term. In the past,~~years. Typically, stock options ~~typically became exercisable one year from the date of award. Commencing in January 2018, stock options have been~~are awarded with ~~three-year~~one-third of each stock option vesting ~~schedules.~~ on each of the first three anniversaries of the corresponding award date.

As of July 31, ~~2019,~~2020, there were approximately ~~1.7 million~~2,190,400 shares of the Company’s common stock reserved for issuance under the ~~Company’s stock plan. This~~Stock Plans; this number includes ~~520,000~~680,999 shares of ~~the Company’s~~ common stock available for future awards.

Summaries of stock option activity under the Company’s approved stock option plans for the six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, along with corresponding weighted average per share amounts, are presented below (shares in thousands):

	Shares		Exercise Price		Remaining Term (years)	Fair Value

									Exercise		Remaining
								Shares	Price		Term (years)	Fair Value
Outstanding, February 1, 2020								1,271	$	44.83	7.18	$	11.06
Granted								172	$	33.81
Exercised								(35)	$	20.82
Forfeited								(16)	$	47.62
Outstanding, July 31, 2020								1,392	$	44.04	7.15	$	10.51
Exercisable, July 31, 2020								843	$	46.38	6.00	$	11.87

									Exercise		Remaining
								Shares	Price		Term (years)	Fair Value
Outstanding, February 1, 2019	1,140		$	44.01	7.54	$	11.22	1,140	$	44.01	7.54	$	11.22
Granted	92		$	50.30				92	$	50.30
Exercised	(59	)	$	26.36				(59)	$	26.36
Forfeited	(38	)	$	46.34				(38)	$	46.34
Outstanding, July 31, 2019	1,135		$	45.37	7.36	$	11.45	1,135	$	45.37	7.36	$	11.45
Exercisable, July 31, 2019	729		$	45.90	6.41	$	11.97	729	$	45.90	6.41	$	11.97

Shares

Exercise
Price

Remaining
Term (years)

Fair Value

Outstanding, February 1, 2018

889

$
44.83

7.91

$
11.74

Granted

97

$
37.60

Exercised

(1
)
$
17.33

Outstanding, July 31, 2018

985

$
44.15

7.65

$
11.45

Exercisable, July 31, 2018

712

$
44.50

6.92

$
11.76

The changes in the number of non-vested options to purchase shares of common stock for the six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, and the weighted average fair value per share for each number, are presented below (shares in thousands):

	Shares		Fair Value

					Shares	Fair Value
Non-vested, February 1, 2020					448	$	9.74
Granted					172	$	5.68
Vested					(62)	$	10.21
Forfeitures					(9)	$	8.08
Non-vested, July 31, 2020					549	$	8.44

					Shares	Fair Value
Non-vested, February 1, 2019	375		$	10.05	375	$	10.05
Granted	92		$	11.68	92	$	11.68
Vested	(33	)	$	8.74	(33)	$	8.74
Forfeited	(28	)	$	11.27
Forfeitures					(28)	$	11.27
Non-vested, July 31, 2019	406		$	10.50	406	$	10.50

Shares

Fair Value

Non-vested, February 1, 2018

301

$
13.55

Granted

97

$
8.74

Vested

(125
)
$
16.19

Non-vested, July 31, 2018

273

$
10.64

~~The total intrinsic value of~~Pursuant to the stock options exercised during the six months ended July 31, 2019 was $1.4 million. The total intrinsic value of the stock options exercised during the six months ended July 31, 2018 was not material. At July 31, 2019, the aggregate market value amounts of the shares of common stock subject to outstanding and exercisable stock options that were “in-the-money” exceeded the aggregate exercise prices of such options by $4.5 million and $4.2 million, respectively.

The Company estimates the fair value of each stock option on the date of award using the Black-Scholes pricing model. The Company believes that its past stock option exercise activity is sufficient to provide it with a reasonable basis upon which to estimate the expected life of newly awarded stock options. The fair value amounts for stock options granted during the periods presented herein were estimated on the corresponding dates of award based on the following weighted average assumptions:

Six Months Ended July 31,

2019

2018

Dividend yield

2.0
%
2.7
%
Expected volatility

34.0
%
36.0
%
Risk-free interest rate

2.4
%
2.0
%
Expected life (in years)

3.3

3.3

~~In April 2019 and 2018, and pursuant to~~ terms of the ~~Stock~~2011 Plan and as described in the corresponding agreements with the executives, the Company awarded performance-based restricted stock units to ~~two~~2 senior executives in April 2020, 2019 and 2018 covering ~~up to~~45,000, 36,000 and 36,000 maximum number of shares of common stock, ~~at each date~~respectively, plus a number of shares to be determined based on the amount of cash dividends deemed paid on shares earned pursuant to the awards. The release of the stock restrictions depends on the total ~~shareholder~~ return performance of the Company’s common stock measured against the performance of a peer-group of common stocks over three-year periods. The ~~award-date~~ fair value amounts for restricted stock units ~~are~~were determined by using the per share market price of the Company’s common stock on the dates of award and the target number of shares for the ~~award,~~awards (50% of the maximum number), by assigning equal probabilities to the thirteen possible payout outcomes at the ends of the three-year vesting periods, and by computing the weighted average of the outcome amounts. For each case, the estimated fair value amount was calculated to be 88.5% of the aggregate market value of the target number of shares on the award date.

The fair values of stock options and restricted stock units are recorded as stock compensation expense over the vesting periods of the corresponding awards. Expense amounts related to stock awards were $1.4 million and $0.9 million for the six months ended July 31, 2020 and 2019, ~~and 2018.~~respectively. At July 31, ~~2019,~~2020, there was ~~$4.4~~$4.6 million in unrecognized compensation cost related to outstanding stock awards that the Company expects to expense over the next three years.

~~NOTE 10 — CASH DIVIDENDS~~

~~On June 20,~~The total intrinsic value amounts of the stock options exercised during the six months ended July 31, 2020 and 2019 were $0.8 million and $1.4 million, respectively. At July 31, 2020, the ~~Company’s board~~aggregate market value amounts of ~~directors declared a regular quarterly cash dividend in~~ the ~~amount of $0.25 per share~~shares of common stock subject to outstanding and exercisable stock options that were “in-the-money” exceeded the aggregate exercise prices of such options by $6.3 million and $4.3 million, respectively.

The Company estimates the weighted average fair value of stock options on the date of award using a Black-Scholes option pricing model, which was ~~paid~~developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Company believes that its past stock option exercise activity is sufficient to provide it with a reasonable basis upon which to estimate the expected life of newly awarded stock options. Risk-free interest rates are determined by blending the rates for three to five year US Treasury notes. The dividend yield is based on the Company’s current annual regular dividend amount. The calculations of the expected volatility factors are based on the monthly closing prices of the Company’s common stock for the five-year periods preceding the dates of the corresponding awards.

The fair value amounts of stock options granted during the six months ended July 31, 2020 and 2019 ~~to stockholders~~were estimated on the corresponding dates of ~~record at~~ the ~~close of business on July 23, 2019. In April 2019,~~awards using the ~~board of directors declared a regular quarterly cash dividend of $0.25 per share of common stock, which was paid to stockholders on April 30, 2019. Last year,~~Black-Scholes option-pricing model reflecting the board of directors declared regular quarterly cash dividends, each in the amount of $0.25 per share of common stock, which were paid to stockholders on July 31, 2018 and April 30, 2018, respectively.following weighted average assumptions:


	Six Months Ended July 31,
	2020		2019
Dividend yield	3.0	%	2.0	%
Expected volatility	30.0	%	34.0	%
Risk-free interest rate	0.5	%	2.4	%
Expected life (in years)	3.4		3.3

NOTE 10 – INCOME TAXES

~~NOTE 11 — INCOME TAXES~~

Income Tax Expense Reconciliation

The Company’s income tax amounts for the six months ended July 31, ~~2019~~2020 and ~~2018~~2019 differed from corresponding amounts computed by applying the federal corporate income tax rate of 21% to ~~loss or~~the income (loss) before income taxes for the periods as ~~shown~~presented in the table below.

Six Months Ended July 31,

2019

2018

Computed expected income tax benefit (expense)

$
7,532

$
(6,266
)
Differences resulting from:

State income taxes, net of federal tax effect

490

(1,176
)
Net operating loss deemed unrealizable

(6,112
)
—

Bad debt loss

5,016

—

Foreign tax differential

(838
)
94

Stock options

204

5

Adjustments and other permanent differences

640

(708
)
Income tax benefit (expense)

$
6,932

$
(8,051
)


	Six Months Ended July 31,
	2020		2019
Computed expected income tax (expense) benefit	$	(367)	$	7,532
Difference resulting from:
Net operating loss carryback		4,286		—
Net operating losses deemed unrealizable		(582)		(6,112)
Foreign tax rate differential		(25)		(838)
State income taxes, net of federal tax effect		(44)		490
Stock options		38		204
Bad debt loss		—		5,016
Adjustments and other differences		(249)		640
Income tax benefit	$	3,057	$	6,932

Foreign income tax expense amounts for the six months ended July 31, ~~2019~~2020 and ~~2018~~2019 were not material. A valuation allowance in the amount of $6.1 million was established against the deferred tax asset amount created by the net ~~operation~~operating loss of APC’s subsidiary in the ~~United Kingdom~~UK for the six months ended July 31, 2019. ~~However, this effect~~Due to the incurrence of additional loss, the allowance amount was ~~substantially offset~~increased by ~~an income tax benefit (federal and state) for~~$0.6 million during the ~~three and~~ six months ended July 31, 2020.

Net Operating Loss Carryback

In an effort to combat the adverse economic impacts of the COVID-19 crisis, the US Congress passed the Coronavirus, Aid, Relief, and Economic Security Act ( the “CARES Act”) that was signed into law on March 27, 2020. This wide-ranging legislation was an emergency economic stimulus package that includes spending and tax breaks aimed at strengthening the US economy and funding a nationwide effort to curtail the effects of the outbreak of COVID-19. The CARES Act has provided many opportunities for taxpayers to evaluate their 2018 and 2019 income tax returns to identify potential tax refunds. One such area is the utilization of net operating losses (“NOLs”). The tax changes of the CARES Act remove the limitations on the future utilization of certain NOLs and re-establish a carryback period for certain losses to five years. The NOLs eligible for carryback under the CARES Act include the Company’s domestic NOL for the year ended January 31, 2020, which was approximately $39.5 million. Substantially all of this loss now may be carried back for application against the Company’s taxable income for the year ended January 31, 2015. The carryback provides a favorable rate benefit for the Company as the loss, which was incurred in a year where the statutory federal tax rate was 21%, will be carried back to a tax year where the tax rate was higher. The amount of this benefit, approximately $4.3 million, was recorded in the ~~amount of approximately $5.9 million which is the favorable estimated tax impact of bad debt loss on loans made to APC from Argan, which were determined to be uncollectible during the three-month~~six-month period ended July 31, ~~2019.~~2020.

Research and Development Tax Credits

During ~~the year ended January 31,~~Fiscal 2019, the Company completed a detailed review of the activities of its engineering staff on major EPC services projects in order to identify and quantify the amounts of research and development credits that may be available to reduce prior year income taxes. This study focused on project costs incurred during the three-year period ended January 31, 2018.

Based on the results of the study, management identified and estimated significant amounts of income tax benefits that were not previously recognized in the Company’s operating results for any prior year reporting period. The amount of research and development tax credit benefit recognized induring the ~~consolidated financial statements last year~~fourth quarter of Fiscal 2019 was $16.2 ~~million, which amount is net of an unfavorable adjustment recorded in the three-month period ended July 31, 2019 in the amount of $0.4~~ million. As described below, the ~~Internal Revenue Service (the “IRS”)~~IRS is examining the research and development credits that were included in the amendments of the Company’s consolidated federal income tax returns for the years ended January 31, 2016 and 2017 that were filed in January 2019. The Company does not ~~anticipate~~believe that any significant unfavorable changes to its income taxes towill arise from the completion of these examinations.

The amount of identified but unrecognized income tax benefits related to research and development credits as of July 31, ~~2019~~2020 was $5.0 million, for which the Company has established a liability for uncertain income tax return positions, most of which is included in accrued expenses. The amount of the liability was ~~$5.1~~also $5.0 million as of January 31, ~~2019.~~2020. The final outcome of these uncertain tax positions is not yet determinable. However, the Company does not expect that the amount of unrecognized tax benefits will significantly change due to any settlement and/or expiration of statutes of limitation over the next 12 months. As of July 31, ~~2019,~~2020, the Company does not believe that it has any other material uncertain income tax positions reflected in its accounts.

As of July 31 and January 31, 2020, the balances of other current assets in the condensed consolidated balance sheets included income tax refunds and prepaid income taxes in the net amounts of approximately $28.6 million and $14.5 million, respectively. The substantial portions of the income tax refunds are expected to be collected after the completion of the federal tax return examinations described below and the filing of the refund request related to the NOL carryback described above.

Income Tax Returns

The Company is subject to federal and state income taxes in the ~~United States,~~US, and income taxes in Ireland and the ~~Republic of Ireland, the United Kingdom and various other state and foreign jurisdictions.~~UK. Tax treatments within each jurisdiction are subject to the interpretation of the related tax laws and regulations which require significant judgment to apply. The Company is no longer subject to income tax examinations by authorities for its fiscal years ended on or before January 31, ~~2015~~2016 except for several notable exceptions including ~~the Republic of~~ Ireland, the ~~United Kingdom~~UK and several states where the open periods are one year longer.

The IRS conducted an examination of the Company’s original federal consolidated income tax return for the year ended January 31, 2016. The IRS represented to the Company that no unfavorable adjustment items were noted during the examination. However, the Company has consented to an extension of the audit timeline which will enable the IRS to examine the amendment to the income tax return, which includes the research and development credit for the year. In addition, the IRS has commenced an examination of the Company’s amended consolidated income tax return for the year ended January 31, 2017. To date, the Company has provided supporting documentation related to the credits and written responses to certain questions as requested by the IRS. The Company expects that it may receive an initial communication of the IRS audit positions before the end of Fiscal 2021.

AtSupplemental Cash Flow Information

The amounts of cash paid for income taxes during the six months ended July 31, 2020 and ~~January~~2019 were $3.1 million and $3.0 million, respectively. During the six months ended July 31, 2020 and 2019, the Company received cash refunds of previously paid income taxes from various taxing authorities in the total amounts of $0.8 million and $7.9 million, respectively.

NOTE 11 – CASH DIVIDENDS

On June 23, 2020, the Company’s board of directors declared a regular quarterly cash dividend and a special cash dividend in the amounts of ~~other current assets presented~~$0.25 and $1.00 per share of common stock, respectively, which were paid on July 31, 2020 to stockholders of record at the close of business on July 23, 2020. On April 9, 2020, the board of directors declared a regular quarterly cash dividend of $0.25 per share of common stock, which was paid to stockholders on April 30, 2020. Last year, the board of directors declared regular quarterly cash dividends, each in the ~~condensed consolidated balance sheets included income tax refunds~~amount of $0.25 per share of common stock, which were paid to stockholders on July 31, 2019 and ~~prepaid income taxes in the combined amounts of $15.3 million and $19.5 million,~~April 30, 2019, respectively. ~~The income tax refunds are amounts expected to be received from taxing authorities based on amended tax returns claiming research and development tax credits in prior years.~~

NOTE 12 ~~— EARNINGS~~– NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

Basic and diluted ~~earnings~~net income (loss) per share amounts are computed as follows (shares in thousands except in ~~the footnote~~notes (1) below the charts):

Three Months Ended July 31,

2019

2018

Net income attributable to the stockholders of Argan, Inc.

$
1,154

$
16,972

Weighted average number of shares outstanding - basic

15,633

15,568

Effects of stock awards (1)

124

105

Weighted average number of shares outstanding - diluted

15,757

15,673

Net income per share attributable to the stockholders of Argan, Inc.

Basic

$
0.07

$
1.09

Diluted

$
0.07

$
1.08

Six Months Ended July 31,

2019

2018

Net (loss) income attributable to the stockholders of Argan, Inc.

$
(28,646
)
$
21,809

Weighted average number of shares outstanding - basic

15,608

15,568

Effects of stock awards (1)

—

105

Weighted average number of shares outstanding - diluted

15,608

15,673

Net (loss) income per share attributable to the stockholders of Argan, Inc.

Basic

$
(1.84
)
$
1.40

Diluted

$
(1.84
)
$
1.39


	Three Months Ended July 31,
	2020		2019

Net income attributable to the stockholders of Argan, Inc.	$	5,609	$	1,154

Weighted average number of shares outstanding – basic		15,653		15,633
Effect of stock awards ⁽¹⁾		135		124
Weighted average number of shares outstanding – diluted		15,788		15,757

Net income per share attributable to the stockholders of Argan, Inc.
Basic	$	0.36	$	0.07
Diluted	$	0.36	$	0.07

~~(1)~~
(1) For the three months ended July 31, 2020 and 2019, the weighted average numbers of shares determined on a dilutive basis exclude the effects of restricted stock units and antidilutive stock options covering aggregates of 761,000 and 530,000 shares of common stock, respectively.


	Six Months Ended July 31,
	2020		2019

Net income (loss) attributable to the stockholders of Argan, Inc.	$	4,846	$	(28,646)

Weighted average number of shares outstanding – basic		15,648		15,608
Effect of stock awards ⁽¹⁾		119		—
Weighted average number of shares outstanding – diluted		15,767		15,608

Net income (loss) per share attributable to the stockholders of Argan, Inc.
Basic	$	0.31	$	(1.84)
Diluted	$	0.31	$	(1.84)

(1) For the six months ended July 31, ~~2019,~~2020, the weighted average number of shares determined on a dilutive basis excludes the ~~effect~~effects of restricted stock units and antidilutive stock options covering ~~530,000~~an aggregate of 831,000 shares of common stock. For the six months ended July 31, 2019, all common stock equivalents, ~~are~~which covered 1,135,067 shares of common stock, were considered to be antidilutive as the Company incurred a net loss for the period. The numbers for the three and six months ended July 31, 2018 exclude the effects of antidilutive stock options covering 486,500 shares, which had exercise prices per share in excess of the average market price per share for the applicable period.loss.

NOTE 13 —– CUSTOMER CONCENTRATIONS

~~Historically, the~~The majority of the Company’s consolidated revenues ~~has related~~relate to performance by the power industry services segment which provided ~~44%~~79% and ~~77%~~44% of consolidated revenues for the three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~43%~~80% and ~~82%~~43% of consolidated revenues for the six months ended July 31, 2020 and 2019, ~~and 2018.~~respectively. The industrial services ~~reporting~~ segment represented ~~53%~~19% and ~~21%~~53% of consolidated revenues for the three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~54%~~18% and ~~16%~~54% of consolidated revenues for the six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

The Company’s most significant customer relationships for the three months ended July 31, 2020 included 1 power industry service customer, which accounted for 70% of consolidated revenues. The Company’s most significant customer relationships for the three months ended July 31, 2019 included ~~one~~1 power industry service customer and ~~one~~1 industrial services customer which accounted for ~~approximately~~ 23% and 11% of consolidated revenues, respectively. The Company’s most significant customer relationships for the ~~three~~six months ended July 31, ~~2018~~2020 included ~~four~~2 power industry service customers, which accounted for ~~approximately 18%, 16%, 11%~~66% and 10% of consolidated revenues, respectively. The Company’s most significant customer relationships for the six months ended July 31, 2019 also included ~~two~~2 power industry service customers which accounted for ~~approximately~~ 12% and 10% of consolidated revenues, respectively. The Company’s most significant customer relationships for the six months ended July 31, 2018 included three power industry service customers which accounted for approximately 20%, 14%, and 13% of consolidated revenues, respectively.respectively

The accounts receivable ~~balance~~balances from ~~one customer~~4 major customers represented ~~16%~~25%, 18%, 10% and 10% of the corresponding consolidated balance as of July 31, ~~2019.~~2020. Accounts receivable balances from ~~two~~3 major customers represented ~~25%~~24%, 21% and ~~15%~~12% of the corresponding consolidated balance as of January 31, ~~2019.~~2020. The contract asset balances from 2 major customers represented 65% and 22% of the corresponding consolidated balance as of July 31, 2020. Contract asset balances from 2 major customers represented 51% and 31% of the corresponding consolidated balance as of January 31, 2020.

NOTE 14 —– SEGMENT REPORTING

Segments represent components of an enterprise for which discrete financial information is available that is evaluated regularly by the Company’s chief executive officer, who is the chief operating decision maker, in determining how to allocate resources and in assessing performance. The Company’s reportable segments recognize revenues and incur expenses, are organized in separate business units with different management teams, customers, talents and services, and may include more than ~~one~~1 operating segment.

Intersegment revenues and the related cost of revenues are netted against the corresponding amounts of the segment receiving the intersegment services. For the three and six months ended July 31, 2020, intersegment revenues totaled approximately $1.1 million and $1.7 million, respectively. For the three and six months ended July 31, 2019, intersegment revenues totaled approximately $0.9 million and $1.4 ~~million, respectively. For both the three months and six months ended July 31, 2018, intersegment revenues totaled approximately $0.4~~ million.

Summarized below are certain operating results and financial position data of the Company’s reportable business segments for the three and six months ended July 31, ~~2019~~2020 and ~~2018.~~2019. The “Other” column in each summary includes the Company’s corporate ~~expenses:~~expenses.


Three Months Ended	Power		Industrial		Telecom
July 31, 2020	Services		Services		Services		Other		Totals
Revenues	$	69,039	$	16,689	$	1,764	$	—	$	87,492
Cost of revenues		55,610		14,896		1,356		—		71,862
Gross profit		13,429		1,793		408		—		15,630
Selling, general and administrative expenses		4,868		1,713		470		2,034		9,085
Income (loss) from operations		8,561		80		(62)		(2,034)		6,545
Other income, net		438		—		—		13		451
Income (loss) before income taxes	$	8,999	$	80	$	(62)	$	(2,021)		6,996
Income tax expense										(1,397)
Net income									$	5,599

Amortization of intangibles	$	60	$	166	$	—	$	—	$	226
Depreciation		174		646		100		1		921
Property, plant and equipment additions		313		94		42		—		449

Current assets	$	356,383	$	23,244	$	1,924	$	121,905	$	503,456
Current liabilities		219,315		12,568		853		699		233,435
Goodwill		18,476		9,467		—		—		27,943
Total assets		389,380		46,099		3,417		122,211		561,107

Three Months Ended July 31, 2019	Power Services			Industrial Services		Telecom Services			Other			Totals

Three Months Ended															Power		Industrial		Telecom
July 31, 2019															Services		Services		Services		Other		Totals
Revenues	$	27,890		$	33,230	$	1,939		$	—		$	63,059		$	27,890	$	33,230	$	1,939	$	—	$	63,059
Cost of revenues	28,906			29,528		1,660			—			60,094				28,906		29,528		1,660		—		60,094
Gross (loss) profit	(1,016		)	3,702		279			—			2,965				(1,016)		3,702		279		—		2,965
Selling, general and administrative expenses	5,659			2,080		539			1,760			10,038				5,659		2,080		539		1,760		10,038
(Loss) income from operations	(6,675		)	1,622		(260		)	(1,760		)	(7,073		)		(6,675)		1,622		(260)		(1,760)		(7,073)
Other income, net	1,490			—		—			152			1,642				1,490		—		—		152		1,642
(Loss) income before income taxes	$	(5,185	)	$	1,622	$	(260	)	$	(1,608	)	(5,431		)	$	(5,185)	$	1,622	$	(260)	$	(1,608)		(5,431)
Income tax benefit												6,411												6,411
Net income												$	980										$	980

Amortization of purchased intangible assets	$	83		$	165	$	45		$	—		$	293

Amortization of intangibles															$	83	$	165	$	45	$	—	$	293
Depreciation	173			606		101			2			882				173		606		101		2		882
Property, plant and equipment additions	812			236		10			—			1,058				812		236		10		—		1,058


Current assets	$	252,367		$	34,822	$	1,948		$	64,000		$	353,137		$	252,367	$	34,822	$	1,948	$	64,000	$	353,137
Current liabilities	45,061			12,258		777			618			58,714				45,061		12,258		777		618		58,714
Goodwill	18,476			12,290		—			—			30,766				18,476		12,290		—		—		30,766
Total assets	281,535			63,393		3,457			71,339			419,724				281,535		63,393		3,457		71,339		419,724

Three Months Ended
July 31, 2018

Power
Services

Industrial
Services

Telecom
Services

Other

Totals

Revenues

$
105,051

$
28,037

$
3,582

$
—

$
136,670

Cost of revenues

79,162

24,037

2,763

—

105,962

Gross profit

25,889

4,000

819

—

30,708

Selling, general and administrative expenses

6,153

1,953

388

1,884

10,378

Income (loss) from operations

19,736

2,047

431

(1,884
)
20,330

Other income, net

1,420

1,400

—

108

2,928

Income (loss) before income taxes

$
21,156

$
3,447

$
431

$
(1,776
)
23,258

Income tax expense

6,314

Net income

$
16,944

Amortization of purchased intangible assets

$
88

$
165

$
—

$
—

$
253

Depreciation

189

511

92

4

796

Property, plant and equipment additions

716

711

247

—

1,674

Current assets

$
341,112

$
29,983

$
4,041

$
78,077

$
453,213

Current liabilities

121,620

16,378

902

942

139,842

Goodwill

20,548

13,781

—

—

34,329

Total assets

369,714

60,077

5,676

78,336

513,803

Six Months Ended
July 31, 2019

Power
Services

Industrial
Services

Telecom
Services

Other

Totals

Revenues

$
48,093

$
60,299

$
4,211

$
—

$
112,603

Cost of revenues

73,432

53,799

3,433

—

130,664

Gross (loss) profit

(25,339
)
6,500

778

—

(18,061
)
Selling, general and administrative expenses

11,305

3,941

1,050

3,330

19,626

Impairment loss

2,072

—

—

—

2,072

(Loss) income from operations

(38,716
)
2,559

(272
)
(3,330
)
(39,759
)
Other income, net

3,590

—

—

304

3,894

(Loss) income before income taxes

$
(35,126
)
$
2,559

$
(272
)
$
(3,026
)
(35,865
)
Income tax benefit

6,932

Net loss

$
(28,933
)

Amortization of purchased intangible assets

$
170

$
331

$
91

$
—

$
592

Depreciation

341

1,166

201

3

1,711

Property, plant and equipment additions

1,874

1,051

107

11

3,043


Six Months Ended	Power		Industrial		Telecom
July 31, 2020	Services		Services		Services		Other		Totals
Revenues	$	117,651	$	26,433	$	3,556	$	—	$	147,640
Cost of revenues		101,320		23,878		2,803		—		128,001
Gross profit		16,331		2,555		753		—		19,639
Selling, general and administrative expenses		10,796		3,836		958		3,839		19,429
Income (loss) from operations		5,535		(1,281)		(205)		(3,839)		210
Other income, net		1,462		—		—		77		1,539
Income (loss) before income taxes	$	6,997	$	(1,281)	$	(205)	$	(3,762)		1,749
Income tax benefit										3,057
Net income									$	4,806

Amortization of intangibles	$	120		331		—		—	$	451
Depreciation		344	$	1,313	$	199	$	2		1,858
Property, plant and equipment additions		693		304		136		—		1,133

Six Months Ended
July 31, 2018

Power
Services

Industrial
Services

Telecom
Services

Other

Totals

Revenues

$
227,538

$
44,486

$
6,012

$
—

$
278,036

Cost of revenues

187,458

39,686

4,732

—

231,876

Gross profit

40,080

4,800

1,280

—

46,160

Selling, general and administrative expenses

11,385

3,788

850

3,992

20,015

Income (loss) from operations

28,695

1,012

430

(3,992
)
26,145

Other income, net

2,095

1,400

—

197

3,692

Income (loss) before income taxes

$
30,790

$
2,412

$
430

$
(3,795
)
29,837

Income tax expense

8,051

Net income

$
21,786

Amortization of purchased intangible assets

$
175

$
331

$
—

$
—

$
506

Depreciation

365

1,024

171

7

1,567

Property, plant and equipment additions

1,542

3,275

547

1

5,365


Six Months Ended	Power		Industrial		Telecom
July 31, 2019	Services		Services		Services		Other		Totals
Revenues	$	48,093	$	60,299	$	4,211	$	—	$	112,603
Cost of revenues		73,432		53,799		3,433		—		130,664
Gross (loss) profit		(25,339)		6,500		778		—		(18,061)
Selling, general and administrative expenses		11,305		3,941		1,050		3,330		19,626
Impairment loss		2,072		—		—		—		2,072
(Loss) income from operations		(38,716)		2,559		(272)		(3,330)		(39,759)
Other income, net		3,590		—		—		304		3,894
(Loss) income before income taxes	$	(35,126)	$	2,559	$	(272)	$	(3,026)		(35,865)
Income tax benefit										6,932
Net loss									$	(28,933)

Amortization of intangibles	$	170	$	331	$	91	$	—	$	592
Depreciation		341		1,166		201		3		1,711
Property, plant and equipment additions		1,874		1,051		107		11		3,043

~~NOTE 15 — SUBSEQUENT EVENT~~

On August 29, 2019, GPS received full notice to proceed with EPC activities under a contract for a 1,875 MW natural gas-fired power plant that will be built in Guernsey County, Ohio. Construction of this state-of-the-art combined cycle facility has begun with completion scheduled in 2022.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion summarizes the financial position of Argan, Inc. and its subsidiaries as of July 31, ~~2019,~~2020, and the results of their operations for the three and six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, and should be read in conjunction with (i) the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2019~~2020 that ~~was~~we filed with the SEC on April ~~10, 2019~~14, 2020 (the “Annual Report”).

Cautionary Statement Regarding Forward Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. We have made statements in this Item 2 and elsewhere in this Quarterly Report on Form 10-Q that may constitute “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” or other similar expressions are intended to identify forward-looking statements. ~~These~~Our forward-looking statements, including those relating to the potential effects of the COVID-19 pandemic on our business, financial position and results of operations, are based on our current expectations and beliefs concerning future developments and their potential effects on us.

There can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for ~~our~~ existing operations and do not include the potential impact of any future acquisitions.

Our forward-looking statements, by their nature, involve significant risks and uncertainties (some of which are beyond our control) and assumptions. They are subject to change based upon various factors including, but not limited to, the risks and uncertainties described in this Quarterly Report on Form 10-Q and our Annual Report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, actual results may vary in material respects from those projected in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Business Description

Argan is a holding company that conducts operations through its wholly-owned subsidiaries, GPS, APC, SMC and TRC. Through GPS and APC, we provide a full range of engineering, procurement, construction, commissioning, operations management, maintenance, development, technical and consulting services to the power generation ~~and~~markets, including the renewable energy ~~markets~~sector, for a wide range of customers, including independent power project owners, public utilities, ~~power plant~~ equipment suppliers and global energy plant construction firms. GPS ~~including any consolidated joint ventures and VIEs,~~ and APC represent our power industry services reportable segment. Through TRC, the industrial fabrication and field services reportable segment provides on-site services that support maintenance turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the ~~southern~~southeast region of the ~~United States~~US and that are based on its expertise in producing, delivering and installing fabricated ~~steel~~metal components such as piping systems and pressure ~~vessels, heat exchangers and piping systems.~~vessels. Through ~~SMC, now conducting business as~~ SMC Infrastructure Solutions, the telecommunications infrastructure services segment provides project management, construction, installation and maintenance services to commercial, local government and federal government customers primarily in the mid-Atlantic region of the ~~United States.~~ US.

We may make additional acquisitions of and/or investments in companies with potential for profitable growth that reflect more than one industrial focus. We expect that they will be held in separate subsidiaries that will be operated in a manner that best provides value for our stockholders.

Overview

The TeesREP Subcontract

In our Form 10-K Annual Report for Fiscal 2019, we disclosed that APC was completing the mechanical installation of the boiler for a biomass-fired power plant under construction in the UK, the TeesREP Project, and that the project had encountered significant operational and contractual ~~challenges in completing a power-plant construction project in the United Kingdom, and that the~~challenges. The consolidated operating results for the year ended January 31, 2019 reflected unfavorable gross profit adjustments related to this ~~project, the Tees Renewable Energy Plant (TeesREP), which is a biomass-fired power plant under construction in Teesside.~~project. The disclosure explained that the construction project ~~progress~~ was behind the schedule originally established for the job and warned that the ~~project~~TeesREP Project may continue to impact ~~the Company’s~~our consolidated operating results negatively until it reaches completion.

~~Subsequent to the filing of our Annual Report,~~By April 30, 2019, APC’s estimates of the unfavorable financial impacts on forecasted costs of the ~~unique~~numerous and ~~numerous~~unique difficulties on this particular project, including ~~increased~~weather delays, inefficiencies due to unanticipated scope and design changes from ~~original~~preliminary plans, project task re-sequencing and various work ~~stoppages due to labor strikes,~~interruptions, had escalated ~~substantially. APC has conducted multiple comprehensive reviews of~~substantially from the ~~remaining contract work,~~estimates prepared ~~updated timelines~~ for the ~~completion of~~prior year-end. As a result, for the three-month period ended April 30, 2019, we recorded a loss related to this project ~~and assessed other factors, such as worker productivity metrics. Currently, we estimate that~~in the ~~forecasted costs to perform the contracted work will exceed projected revenues by $30.9 million. The total~~ amount of ~~this loss was recognized~~$27.6 million and reversed profit in ~~our operating results for~~ the ~~six-month~~amount of $0.7 million that had been recorded in prior periods. For the three-month period ended July 31, 2019, ~~including $3.4 million reflected in our operating results for the three months ended July 31, 2019.~~

~~Currently,~~ APC ~~continues~~recorded additional loss related to ~~perform the works on~~ the TeesREP ~~project for Técnicas Reunidas (TR),~~Project in the amount of $3.4 million.

During the fourth quarter of Fiscal 2020, APC and its customer, the engineering, procurement and construction services contractor on ~~this project. APC is a major subcontractor~~the TeesREP Project, agreed to ~~TR. APC and TR continue to negotiate~~amended operational and commercial terms for the completion of the project. At the time, this framework addressed the project ~~as well as to resolve past commercial differences. It is not certain that we will be able~~schedule, payment terms, the scope of the remaining effort, performance guarantees and other terms and conditions for APC to reach agreement on the terms and/or to reconcile the commercial differences in a timely manner, if at all. We continue to reserve our rights under the contract. In the event we are unable to reach agreement, we will consider other courses of action, operationally and legally, that may provide mitigation to the loss on this project. Argan has provided certain letters of credit and a parent company performance guarantee to TR on the TeesREP project on behalf of APC. The combined amount of accounts receivable (which are current) and contract assets included in the condensed consolidated balance sheet as of July 31, 2019, less the reserve for contract loss included in accrued expenses in the amount of $7.3 million, was $16.1 million.

~~Nonetheless, we did have notable favorable accomplishments and other events for the quarter ended July 31, 2019, including the following:~~

· ~~The booking of a previously announced new project for GPS boosted our project backlog amount to over $1.4 billion as of July 31, 2019.~~

· ~~APC successfully reached~~ substantial completion of its ~~gas-fired power plant~~portion of the total project.

Although this negotiation returned a meaningful amount of stability to the continuation of the project ~~located~~efforts, the amendment did not resolve significant past commercial differences.

Construction on the TeesREP Project was suspended on March 24, 2020 due to the COVID-19 pandemic. At the time of the work suspension, APC had completed approximately 90% of its subcontracted work. As a condition for resuming its efforts on the TeesREP Project, APC entered into Amendment No. 2 to the subcontract, effective June 1, 2020, covering new terms and conditions for completion of the installation of the boiler. This agreement represents a global settlement of past commercial differences with both parties making significant concessions, and converts the billing arrangement for the remaining work to a time-and-materials based scheme.

Despite the change to the billing arrangements, we have treated Amendment No. 2 as a continuation of the original subcontract because the arrangement continues to represent a single performance obligation to our customer, the delivery of a complete functioning and integrated boiler, that was only partially satisfied when the modification to the subcontract occurred. The catch-up impact of the accounting for the modification of the subcontract partially offset by project-related charges recorded by APC resulted in ~~Spalding, England.~~

· ~~TRC reported record quarterly revenues~~a net improvement to gross profit for the three months ended July 31, ~~2019.~~

· ~~We paid a regular quarterly cash dividend of $0.25 per share of common stock to our stockholders.~~

Subsequent to quarter-end, GPS received a full notice to proceed (“FNTP”) with EPC activities under a contract to build a 1,875 MW natural gas-fired power plant in Guernsey County, Ohio. The value of this EPC services contract was included2020 in the amount of ~~project backlog we reported~~$2.3 million.

We currently expect that the forecasted costs at completion for the TeesREP Project will exceed projected revenues by approximately $32.3 million, which is the amount of the expected loss that has been reflected in the condensed consolidated financial statements as of July 31, 2020. The amount of the remaining contract loss reserve as of July 31, 2020 was approximately $2.3 million; the comparable balance at January 31, 2020 was $5.8 million. These balances were included in accrued expenses in the accompanying condensed consolidated balance sheets. The total amounts of accounts receivable and contract assets related to the TeesREP Project and included in the corresponding condensed consolidated balance sheets were $11.2 million as of July 31, 2020 and $19.2 million as of January 31, ~~2019.~~2020.

~~Our~~Additionally, during the quarter ended July 31, 2020, we made changes in the operational and financial leadership at APC. The new management team is focused on completing the TeesREP Project, reducing costs, limiting future commercial and project risks and achieving sustained profitability for the combined operations of APC. We believe that the APC leadership changes, our active management of this subcontract and the restructuring of the subcontract terms and conditions have reduced the potential for future material loss on the TeesREP Project. However, should APC encounter additional difficulties as it resumes construction activity on the TeesREP Project, including future work interruptions that may arise related to any resurgence of the COVID-19 outbreak or any failure of the customer to make timely payment of billed amounts, additional losses may be incurred that would be reflected in operating results when identified and quantified.

Summary of Operating Results

Due substantially to the recovering revenues of GPS, consolidated revenues for the three months ended July 31, ~~2019~~2020 were ~~$63.1~~$87.5 million, which represented an increase of $24.4 million, or 38.7%, from consolidated revenues of $63.1 million reported for the three months ended July 31, 2019. The revenues of the power industry services segment, including GPS, represented 78.9% and 44.2% of consolidated revenues for the three months ended July 31, 2020 and 2019, respectively. On the other hand, the revenues of TRC and SMC for the three months ended July 31, 2020 declined by 49.8% and 9.0%, respectively, from the comparable amounts reported for the three months ended July 31, 2019, and together represented 21.1% of consolidated revenues for the quarter ended July 31, 2020.

We believe that all of our businesses were adversely impacted during the three months ended July 31, 2020, to some degree, by continuing difficulties presented by the COVID-19 outbreak. The results for APC were hurt by the slow resumption of postponed Irish works projects and the suspension and restart of construction activities on the TeesREP Project. The challenges of managing the continuing activities of the Guernsey Power Station project during this period of various health and safety restrictions resulted in project spending by GPS falling slightly short of prior expectations. In addition, our consolidated revenues suffered from the effects of project delays by customers of both TRC and SMC attributable to the restrictive work environments caused by the pandemic. However, early performance on several large projects during the three months ended July 31, 2020, added to project backlog by TRC late in the first quarter, did contribute to a ~~decline~~consecutive quarter increase of ~~$73.6~~71.3% in the revenues for TRC.

Consolidated gross profit for the three months ended July 31, 2020 was $15.6 million, ~~from $136.7~~or 17.9% of the corresponding consolidated revenues, which reflected the favorable impacts of the higher consolidated revenues and the catch-up adjustment recorded in connection with the negotiation of Amendment No. 2 to the TeesREP subcontract. Our gross profit reported for the three months ended July 31, 2019 was $3.0 million, or 4.7% of corresponding consolidated revenues. Selling, general and administrative expenses for the three months ended July 31, 2020 and 2019 were $9.1 million and $10.0 million, respectively. Due to the extremely low rates of return on amounts invested in cash equivalents during the current year, other income declined to $0.5 million for the three months ended July 31, ~~2018,~~2020 from $1.6 million for the comparable quarter of the prior year despite the increase in the amount of invested funds between years.

Due primarily to consolidated pre-tax book income reported for the three months ended July 31, 2020 in the amount of $7.0 million, we reported income tax expense in the amount of $1.4 million for the quarter. We recorded an income tax benefit for the three months ended July 31, 2019 in the amount of approximately $6.4 million which primarily reflected the estimated favorable tax impact of a bad debt loss on loans made to APC from Argan, which were determined to be uncollectible during the prior year quarter.

With results reflecting primarily the factors identified above, the consolidated net income attributable to our stockholders was $5.6 million, or $0.36 per diluted share, for the three months ended July 31, 2020. For the three months ended July 31, 2019, we reported consolidated net income attributable to our stockholders of $1.2 million, or $0.07 per diluted share.

The improved consolidated revenues for the quarter ended July 31, 2020 were the primary driver for the increased consolidated revenues for the six-month period ended July 31, 2020 which were $147.6 million; this amount represented a 31.1% improvement from the amount of revenues for the six months ended July 31, 2019. The revenues of the power industry services segment, including GPS, represented 79.7% and ~~they have decreased to $112.6~~42.7% of consolidated revenues for the six months ended July 31, 2020 and 2019, respectively. Last year, the majority of consolidated revenues were contributed by the industrial services business of TRC which reported revenues of $60.3 million for the six months ended July 31, 2019, ~~from $278.0 million~~or 53.6% of consolidated revenues for the prior year period. Despite the consecutive quarter improvement in the revenues of TRC, its revenues declined by 56.2% for the six months ended July 31, ~~2018. As GPS prepares~~2020, as compared to ~~proceed fully with its new projects, its revenues remain at a low level. However,~~ the ~~commencement of construction activities for the Guernsey Power Station should result in increased revenues over the coming periods. The~~ revenues of the ~~power industry services segment~~comparable period last year, and represented only 44.2% and 42.7% of consolidated revenues for the three and six months ended July 31, 2019, respectively. For the three and six months ended July 31, 2018, the percentage shares were 76.9% and 81.8%, respectively. The majority17.9% of consolidated revenues for the current year ~~have been contributed by the industrial services business of TRC which continued its strong top-line performance by reporting revenues of $33.2 million and $60.3 million~~period.

Consolidated gross profit for the ~~three and~~ six months ended July 31, ~~2019, respectively. These amounts were 52.7% and 53.6%~~2020 was $19.6 million, or 13.3% of the corresponding consolidated revenues, ~~for~~which reflected primarily the ~~three and six months ended July 31, 2019, respectively, and represented increases~~favorable impact of ~~18.5% and 35.5%, respectively, from the comparable revenues for the three and six months ended July 31, 2018.~~

higher consolidated revenues. The significant subcontract loss incurred by APC caused us to report a consolidated gross loss of $18.1 million for the six months ended July 31, 2019.

The ~~contract~~ loss on the TeesREP Project also prompted us to record an impairment loss related to the goodwill of APC in the amount of $2.1 million during the first ~~quarter. Due substantially to these items, we incurred a consolidated loss before income tax benefit of $35.9~~quarter last year, which amount is included in the reported results for the six months ended July 31, 2019. Selling, general and administrative expenses were $19.4 million and $19.6 million for the six months ended July 31, 2020 and 2019, respectively. Other income, representing primarily income earned on temporary cash investments, declined to $1.5 million for the six months ended July 31, 2020 from $3.9 million for the six months ended July 31, 2019.

For the six months ended July 31, 2020, we recorded an income tax benefit in the amount of $3.1 million which reflected primarily the net operating loss carryback benefit of $4.3 million most of which was recorded in the first quarter of the current year. We ~~have~~ recorded an income tax benefit for the ~~three~~six months ended July 31, 2019 in the amount of approximately ~~$6.4~~$6.9 million which primarily ~~reflects~~reflected the favorable estimated tax impact of athe bad debt loss ~~on loans made to APC from Argan, which were determined to be uncollectible during the three-month period ended July 31, 2019.~~identified above. On the other hand, we ~~have~~did not ~~recorded~~record any income tax benefit ~~for~~related to the large operating loss of APC’s subsidiary in the ~~United Kingdom~~UK for the six months ended July 31, 2019. ~~As a result,~~

For the six months ended July 31, 2020, our improved overall operating performance resulted in net income attributable to our stockholders in the amount of $4.8 million, or $0.31 per diluted share. Last year, due substantially to the subcontract loss recorded for the TeesREP Project, we ~~have~~ reported a net loss attributable to ~~the~~our stockholders ~~of Argan~~ in the amount of $28.6 million, ~~for the six months ended July 31, 2019,~~ or $1.84 ~~loss~~ per share on a diluted basis. Last year, for the six months ended July 31, 2018, we reported net income attributable to the stockholders of Argan in the amount of $21.8 million, or $1.39 per share on a diluted basis.dilutive share.

Primarily due to the low volume of business at GPS and the additional contract loss amount of $3.4 million recorded by APC, offset by the favorable effect of the tax benefit identified above, we had net income attributable to the stockholders of Argan in the amount of $1.2 million for the three months ended July 31, 2019, or $0.07 per share on a diluted basis. Last year, for the three months ended July 31, 2018, we reported net income attributable to the stockholders of Argan in the amount of $17.0 million, or $1.08 per share on a diluted basis.

As it takes time for us to ramp-up meaningful revenues associated with new construction projects due to the project life-cycles of gas-fired power plants, we expect current year results to improve slowly over the remaining two quarters. We are optimistic that we will see a resumption of year-to-year growth as these new projects mature. We continue to evaluate new project opportunities and negotiations continue with project owners for several other major projects.

~~Project Backlog~~Major Customer Contracts

InDuring August 2019, GPS received a ~~FNTP~~full notice to proceed with ~~EPC~~ activities under aan EPC services contract to build an 1,875 MW combined cycle natural gas-fired power plant in Guernsey County, Ohio. ~~This project was announced early in the first quarter and its contract value was reflected in project backlog at that time.~~ The Guernsey Power Station ~~is being~~was jointly developed by Caithness Energy, L.L.C. ~~(“Caithness”)~~ and Apex Power Group, LLC. ~~Last~~The ramp-up of activity on this project has favorably impacted our quarterly consolidated operating results since then with its increasing revenues. Substantial completion of this project is currently scheduled to occur by the end of calendar year ~~we completed the construction of the Freedom Generating Station for Caithness,~~2022.

In January 2020, GPS entered into an EPC services contract with Harrison Power, LLC (“Harrison Power”) to construct a ~~1,040~~1,085 MW ~~combined cycle~~ natural gas-fired power plant in the Village of Cadiz, Harrison County, Ohio. The project is being developed by EmberClear, the parent company of Harrison Power. On March 10, 2020, we announced that in late February 2020 GPS entered into an EPC services contract with ESC Brooke County Power I, LLC to construct the Brooke County Power plant, a 920 MW natural gas-fired power generation facility, in Brooke County, West Virginia. The facility is being developed by Energy Solutions Consortium, LLC. On March 12, 2020, we announced that GPS had entered into an EPC services contract with NTE Connecticut, LLC to construct the Killingly Energy Center, a 650 MW natural gas-fired power plant, in Killingly, Connecticut. The facility is being developed by NTE Energy, LLC (“NTE”). We anticipate adding the value of each of these new contracts to project backlog at times closer to their financial close and expected start dates. We are cautiously optimistic that the start of construction activities for at least two of these three projects will occur between three and nine months from now. However, we cannot predict with certainty when the projects will commence. The start dates for construction are generally controlled by the project owners.

We announced in March 2018 that GPS entered into an EPC services contract with an affiliate of NTE to construct an approximately 500 MW natural gas-fired power plant in Rockingham County, North Carolina. The Reidsville Energy Center will be similar to two gas-fired power plants substantially completed by GPS for NTE during Fiscal 2019, the Kings Mountain Energy Center located in ~~Pennsylvania.~~Kings Mountain, North Carolina, and the Middletown Energy Center located in Middletown, Ohio. At the time, we expected this project to commence within a reasonable amount of time. However, due to unforeseen project owner delays, including a grid connection dispute between the project owner and a public utility, contract activities have not yet started for this new project. If the current dispute with the public utility is not resolved on terms that move the project forward, we will most likely remove the value of the Reidsville Energy Center from project backlog. In May 2019, GPS entered into an EPC services contract to construct a 625 MW ~~natural gas-fired~~ power plant in Harrison County, West ~~Virginia,~~Virginia. Caithness is partnered with ESC to develop this project. As a limited notice to proceed with certain preliminary activities was received from the owner of this project at the time, the value of ~~which~~the contract was added to our project ~~backlog at that time. Caithness partnered with Energy Solutions Consortium, LLC (“ESC”) to develop this project.~~

Both new facilities will be state-of-the-art combined cycle power plants, with power islands based on natural gas-fired turbines supplied by General Electric, providing electricity to the PJM grid. As indicated above,backlog. However, construction activities for the ~~power generating~~ facility are not likely to begin before January 31, 2021 and until financial close is achieved.

As announced in ~~Guernsey have begun with completion scheduled in 2022. A limited notice~~Fiscal 2019, GPS entered into an EPC services contract to ~~proceed (“LNTP”) with certain preliminary activities has been received from~~construct the ~~owners for the project in Harrison County. However, the construction commencement dates for this power plant, as well as~~Chickahominy Power Station, a ~~project to build a~~1,740 MW natural gas-fired power plant, in ~~Reidsville, Ohio (the~~Charles City County, Virginia. Even though we are providing financial and technical support to the project development effort through a consolidated VIE and project development milestones continue to be achieved, we have not included the value of this contract in our project backlog. Due to several factors that are slowing the pace of the development of this project, including additional time being required to secure the natural gas supply for the plant and to obtain the necessary equity financing, we currently cannot predict when construction will commence, if at all.

The aggregate rated electrical output amount for the natural gas-fired power plants for which ~~was included~~we have signed EPC services contracts is approximately 7.3 gigawatts with an aggregate contract value in excess of $3.0 billion. We include the value of an EPC services contract in project backlog ~~as of July 31 and January 31, 2019), have been pushed out and~~when we ~~cannot predict with certainty the start dates at this time. For all projects, the start date for construction is generally controlled by the project owners. However, we~~ believe that it is probable that ~~both of these projects~~the project will commence within a reasonable ~~timeframe.~~

timeframe, among other factors. Our project backlog amount was approximately ~~$1.4~~$1.2 billion and ~~$1.1~~$1.3 billion ~~as of~~at July 31, 2020 and January 31, ~~2019,~~2020, respectively. Our reported amount of project backlog at a point in time represents the total value of projects awarded to us that we consider to be firm as of that date less the amounts of revenues recognized to date on the corresponding ~~projects.~~projects (project backlog is larger than the value of remaining unsatisfied performance obligations, or RUPO, on active contracts; see Note 2 to the accompanying condensed consolidated financial statements). Cancellations or reductions may occur that may reduce project backlog and our expected future revenues. ~~We include the value of an EPC services contract in project backlog when we believe that it is probable that the project will commence within a reasonable timeframe, among other factors.~~

As announced in Fiscal 2019, GPS entered into an EPC services contract to construct the Chickahominy Power Station, a 1,600 MW natural gas-fired power plant, in Charles City County, Virginia. Even though we are providing financial and technical support to the project development effort through a consolidated VIE, we have not included the value of this contract in our project backlog. The project development continues to progress and we are cautiously optimistic the project will start later this year; at which time we will add the contract value to project backlog.

We ~~believe~~have maintained that the delays in new business awards to GPS and the project construction starts of certain previously awarded projects relate to a variety of factors, especially in the northeast and mid-Atlantic regions of the ~~United States. For example, there is some remaining uncertainty surrounding~~US. Currently, we believe that the ~~level of regulatory support for coal as part~~ability of the owners of fully developed gas-fired power plant projects to close on equity and permanent debt financing has been challenged by uncertainty in the capital markets.

The viability of future revenue forecasts by power plant owners and operators, particularly independent power producers, depends, to a significant degree, on the amount of future capacity supply secured for a particular power source located within the electricity region coordinated by PJM. For new power projects, lack of visibility regarding future capacity revenue streams complicates the search for equity and debt financing considerably. Most of our recently completed and awarded EPC service contracts relate to the construction of natural gas-fired power plants located within the geographic footprint of the electric power system operated by PJM, the regional transmission organization that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia.

In December 2019, Federal regulators voted to effectively raise the bids of subsidized resources selling their power into the PJM wholesale capacity market. Clean energy ~~mix,~~advocates and other market observers feared the move by the regulators would severely hinder incentives intended to bring new zero emissions resources online, while favoring incumbent fossil fuels. PJM was provided 90 days to comply with the order and to provide regulators with a timeline for its next capacity auction. PJM had previously suspended all activities and deadlines relating to the base capacity auctions for the 2022/2023 and 2023/2024 electricity delivery years. PJM has submitted its compliance filing response to FERC for review and approval, including a proposed plan for restarting the capacity auctions. Uncertainty relating to PJM capacity auctions may continue to disrupt capital markets. As a result, our commencement of the new EPC power plant projects could be delayed until PJM releases new capacity auction bidding rules approved by the FERC regulators and announces future capacity auction schedules.

Besides the downturn in the demand for electric power during the COVID-19 outbreak in the US that is discussed below, other unfavorable factors include an increase in the amount of power generating capacity provided by renewable energy assets, ~~and~~ improvements and decreasing prices in renewable energy storage ~~solutions. Together with the difficulty in obtaining project equity financing, these factors may be impacting the planning~~solutions and ~~initial phases for the construction of new natural gas-fired power plants which continue to be deferred by project owners.~~

Although the downward trend was interrupted last year, our country has experienced a decline in carbon dioxide emissions from power plants as the growth in renewable energy and the supply of inexpensive natural gas have moved more energy producers away from coal. The coal-fired power plant fleet is generally old. It remains expensive to keep the coal plants running, and they are not competitive in the marketplace. Nevertheless, in some cases, new support may encourage the continued operation of old coal plants that might otherwise be retired without any government intervention. Other unfavorable factors include challenging energy capacity auctions for new power generating assets, the impacts ofincreased environmental ~~activism and the resolve of several states to move towards 100% renewable energy.~~activism. Protests against fossil-fuel related energy projects continue to garner media attention and stir public skepticism about new pipelines resulting in project delays due to onsite protest demonstrations, indecision by local officials and lawsuits. For example, in July 2020, Dominion Energy and Duke Energy announced the abandonment of plans to complete the major Atlantic Coast Pipeline, ending a seven-year effort to build a 600-mile natural gas pipeline between West Virginia and eastern North Carolina, citing that the economic viability of the project was threatened by continuing delays and increasing cost uncertainty after a federal judge issued a ruling preventing the use of an accelerated construction permitting process.

Although this recent pipeline cancellation decision is not expected to have any direct unfavorable effect on any of the pending projects awarded to GPS, other pipeline approval delays may jeopardize projects that are needed to bring supplies of natural gas to planned gas-fired power plant sites, thereby increasing the risk of future power plant project delays or cancellations.

In the New England and mid-Atlantic regions of the US, power plant operators are challenged by the requirements of the Regional Greenhouse Gas Initiative, or “RGGI,” which is a cooperative effort by states in these regions to cap and reduce power sector carbon dioxide emissions. In addition, various cities, counties and states have adopted clean energy and carbon-free goals or objectives with achievement expected by a certain future date, typically 10 to 30 years out. These aspirational goals may increase the risk of a new power plant becoming a stranded asset long before the end of its otherwise useful economic life, which is a risk that potential equity capital providers may be unwilling to take. The difficulty in obtaining project equity financing and the other factors identified above, may be adversely impacting the planning and initial phases for the construction of new natural gas-fired power plants which continue to be deferred by project owners.

We believe that it is important to note that the plans for two of our contracted natural gas-fired power plant projects will adopt integrated “green” hydrogen solution packages developed by a major gas turbine manufacturer. While the plants will initially run on natural gas alone, the plants will eventually shift to burning hydrogen, thereby establishing power-generation flexibility for these plants.

Market Outlook

~~The~~Although the total amount of electricity generated by utility-scale power facilities in calendar year 2019 declined by 1.3% from the total amount in 2018, the 2019 amount was the second highest total annual amount of electricity generated by utility-scale ~~facilities~~power plants since 2010. In the reference case included in its Annual Energy Outlook 2020 released in January 2020, the ~~United States in calendar year 2018 was the highest amount generated since 2007. In its latest base-case outlook, the U.S.~~US Energy Information Administration (the “EIA”) ~~forecasts~~again forecasted slow but steady growth in net electricity generation through 2050 with average annual increases of ~~approximately~~slightly less than 1.0% per year. The growth rate is tempered by new electricity-efficient devices and production processes replacing older, less-efficient appliances, heating, cooling and ventilation systems and capital equipment. ~~Nonetheless,~~

Despite the ~~EIA forecasts continued growth for~~overall decline in the amount of electricity generated in the US in 2019 and the increases in the amounts of electricity provided by utility-scale wind and solar power sources, the amount of electricity generated by natural gas-fired power plants rose by 7.7% during 2019, and it represented 38.4% of the total electric power generated in the US in 2019. The combined amount of power generated by the wind and the sun represented 10.8% of total utility-scale power generation in 2019. The amount of electricity generated from coal decreased by 15.7% in 2019 from its generation ~~through 2050 with average annual increases of 1.2% per year. EIA expects the~~amount for 2018, and coal’s share of the total, utility-scale electricity generation mix declined from ~~natural gas-fired power plants in the United States to rise from approximately 34% in~~27.4% for 2018 to ~~37% in 2022 and to 39% by 2050. The generation share from coal is forecast to fall steadily during these periods, from 28% in 2018 to 23% in 2022 to 17% by 2050.~~

~~As reported by EIA, net~~23.5% for 2019. During 2019, power companies retired or converted roughly 15,100 MW of coal-fired electricity generation, ~~at utility-scale facilities~~reported to be enough to power about 15 million homes. That retirement capacity reduction was second only to the record 19,300 MW of capacity shut down in our country rose by 3.6% during 2018 as net generation from natural gas, wind and solar sources increased by 13.2%, 8.1% and 25.0%, respectively. Moreover, the share of net electricity generation fueled by natural gas rose from approximately 31.7% in 2017 to 34.4% for 2018. The net electricity generation from coal declined by 4.9% for the year. 2015.

In summary, the share of the electrical power ~~generation mix~~generation-mix in the US fueled by natural gas, the sun and wind continued ~~its increase,~~to rise during 2019, while the share fueled by coal ~~has~~ continued its fall. Over the ten-year period ended in 2019, the amount of electrical power fueled by natural gas in the US increased by 72% while the amount of utility-scale power generated by coal fell by 45%.

~~Net~~However, reduced economic activity in the US related to the COVID-19 pandemic has caused significant changes in energy supply and demand patterns. In its Short-Term Energy Outlook released in August 2020, EIA now forecasts that total electric power sector generation in the US will decline by about 5% in 2020. Most of the expected decline is predicted for coal-fired and nuclear generation. The updated forecast for natural gas generation is that it will increase again this year, reflecting currently favorable fuel costs and the addition of new generating capacity, before declining in 2021 as the price of natural gas is forecasted to rise. The ultimate adverse impacts of the COVID-19 outbreak in the US on the forecast of electricity generation ~~by utility-scale facilities in our country declined by 1.5%~~over the long-term are not known at this time.

Renewable energy sources are forecasted to account for the ~~five months ended May 31, 2019 compared with~~largest portion of new generating capacity in 2020, driving EIA’s updated forecast of 10% growth in renewable generation by this electric power sector. However, it will be interesting to observe whether the ~~same period~~recent power shortages in California will reduce the pace of ~~2018. However, the net generation from natural gas rose~~fossil-fuel-fired power plant eliminations planned by ~~6.4% between five-month periods and represented a 34.6% share~~states that are in pursuit of ~~the net generation from all fuel sources. The net~~extremely high renewable energy portfolios. It has been reported that renewables currently provide approximately 36% of electricity generation ~~from coal decreased by 11.0% between~~in California. Yet, the ~~comparable five-month periods and~~recent experience is that the ~~net electricity generation from~~increasing dependence on intermittent renewable energy sources, ~~(other than hydroelectric power) increased~~especially solar, is making it harder to ensure reliable power in California as millions of its residents have lost power during a late summer heat wave. The lesson may be that fossil-fuel electricity generation sources remain critical elements of the power generation mix in order to assure grid reliability by ~~1.3%. The~~avoiding power outages.

In the pre-COVID-19 reference case of the 2020 outlook identified above, the EIA predicted that coal-fired and nuclear power generating capacity would decline by approximately 47% and 20% by 2050, respectively, representing only 13% and 12% shares of ~~net~~the electricity generation ~~from coal~~mix by 2050, respectively. It is important to note that most of the reduction in the coal-fired and ~~other renewable sources~~nuclear capacity was already predicted to occur in the period 2020-2025. As a result, natural gas-fired power generating capacity was forecasted to increase by 26% over the next five years and by 67% by 2050 (before any adjustments for adverse and long-lasting effects of the COVID-19 pandemic on the demand for electricity). It is logical that this outlook represented the driver for the ~~five-month period ended May 31, 2019 were 24.2% and 11.8%, respectively.~~

~~Over~~realization by at least certain power producers that the ~~next three years, EIA forecasts that~~near-term addition of new ~~wind and photovoltaic solar capacity will continue to be added~~natural gas-fired power plants to the utility-scale power generation fleet in the ~~United States at~~US is necessary. As a ~~brisk pace substantially attributable to declining equipment costs and the availability of valuable tax credits. As these credits decline and then expire early~~result, we have experienced meaningful growth in the ~~next decade,~~number of new EPC service contracts awarded to us.

In our view, the ~~wind capacity additions are expected to slow. Although tax incentives related to solar power also expire, the continuing decline~~competitive landscape in the ~~cost of solar power equipment is predicted to sustain the growth of photovoltaic solar power generation facilities. Nonetheless, persistent low~~EPC services market for natural ~~gas prices, lower~~gas-fired power plant ~~operating costs and higher energy generating efficiencies should sustain~~construction has changed significantly. Several significant competitors announced that they were exiting the ~~demand~~market for ~~modern combined cycle~~a variety of reasons. Others have announced intentions to avoid entering into fixed-price contracts. While the competitive market remains dynamic, we expect that there will be fewer competitors for new gas-fired power ~~plants~~plant EPC project opportunities in the foreseeable future. ~~Natural gas is relatively clean burning, cost-effective and reliable; its benefits as a source of power are compelling.~~

We believe that the future long-term prospects for natural gas-fired power plant construction ~~are~~remain generally favorable as natural gas is the primary source for power generation in our country. Major advances in the safe combination of horizontal drilling techniques and ~~the practice of~~ hydraulic fracturing led to the boom in natural gas ~~supply~~supplies which ishave been available at consistently low ~~prices now and in the foreseeable future.~~prices. The abundant availability of cheap, less carbon-intense and higher efficiency natural gas should continue to be a significant factor in the economic assessment of future power generation capacity additions. ~~As indicated~~However, as identified above, stability in the ~~demand for electric power in this country is expected to grow slowly but steadily over the long term. Demands for electricity, the ample supply~~availability of natural gas supplies and ~~the future retirement of coal, nuclear and inefficient gas-fired energy plants, should result in modern~~ natural ~~gas-fired energy plants representing a substantial portion of new power generation additions~~gas prices, particularly in the ~~future and an increased share of~~short-term, may be threatened due to pandemic-caused uncertainties.

Despite the ~~power generation mix.~~

Moreover, the competitive landscape in the EPC services market for natural gas-fired power plant construction has changed significantly. Last year, several significant competitors announced that they were exiting the market for a variety of reasons. While the competitive market remains dynamic,pandemic, we ~~expect that there will be fewer competitors for new gas-fired power plant EPC project opportunities in the foreseeable future.~~

We believe that the development of natural gas-fired power generation facilities in the ~~United States~~US should continue to provide new construction opportunities for us although, in the near term, the pace of new opportunities emerging may be restrained inand the ~~near term as discussed above.~~starts of awarded EPC projects may be delayed. We are committed to the rational pursuit of new construction projects and the future growth of our revenues. This may result in our decision to make investments in the development and/or ownership of new projects. Because we believe in the strength of our balance sheet, we are willing to consider certain opportunities that include reasonable and manageable risks in order to assure the award of the related EPC services ~~contract~~contracts to us.

We believe that the Company has a ~~growing~~ reputation as an accomplished and cost-effective provider of EPC and other large project construction contracting services. We are convinced that the recent series of new EPC projects awarded to us confirms the soundness of our belief. With the proven ability to deliver completed power facilities, particularly combined cycle, natural gas-fired power plants, we are focused on expanding our position in the power markets where we expect investments to be made based on forecasts of electricity demand covering decades into the future. We believe that our expectations are valid and that our plans for the future continue to be based on reasonable assumptions.

In July 2020, confidence in our financial strength and the prospects for our business going forward prompted our board of directors to declare and to pay a special cash dividend in the amount of $1.00 per share (see Note 11 to the accompanying condensed consolidated financial statements) and to authorize the use of $25.0 million to repurchase shares of our common stock (see Item 2 in Part II of this Quarterly Report on Form 10-Q).

Comparison of the Results of Operations for the Three Months Ended July 31, ~~2019~~2020 and ~~2018~~2019

We reported a net income attributable to our stockholders of ~~$1.2~~$5.6 million, or ~~$0.07~~$0.36 per diluted share, for the three months ended July 31, ~~2019.~~2020. For the three months ended July 31, ~~2018,~~2019, we reported a comparable net income amount of ~~$17.0~~$1.2 million, or ~~$1.08~~$0.07 per diluted share.

The following schedule compares our operating results for the three months ended July 31, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands):

	Three Months Ended July 31,
	2019			2018			$ Change			% Change

												Three Months Ended July 31,
												2020		2019		$ Change		% Change
REVENUES
Power industry services	$	27,890		$	105,051		$	(77,161	)	(73.4	)%	$	69,039	$	27,890	$	41,149	147.5	%
Industrial fabrication and field services	33,230			28,037			5,193			18.5			16,689		33,230		(16,541)	(49.8)
Telecommunications infrastructure services	1,939			3,582			(1,643		)	(45.9	)		1,764		1,939		(175)	(9.0)
Revenues	63,059			136,670			(73,611		)	(53.9	)		87,492		63,059		24,433	38.7
COST OF REVENUES
Power industry services	28,906			79,162			(50,256		)	(63.5	)		55,610		28,906		26,704	92.4
Industrial fabrication and field services	29,528			24,037			5,491			22.8			14,896		29,528		(14,632)	(49.6)
Telecommunications infrastructure services	1,660			2,763			(1,103		)	(39.9	)		1,356		1,660		(304)	(18.3)
Cost of revenues	60,094			105,962			(45,868		)	(43.3	)		71,862		60,094		11,768	19.6
GROSS PROFIT	2,965			30,708			(27,743		)	(90.3	)		15,630		2,965		12,665	427.2
Selling, general and administrative expenses	10,038			10,378			(340		)	(3.3	)		9,085		10,038		(953)	(9.5)
(LOSS) INCOME FROM OPERATIONS	(7,073		)	20,330			(27,403		)	N/M
INCOME (LOSS) FROM OPERATIONS													6,545		(7,073)		13,618	NM
Other income, net	1,642			2,928			(1,286		)	(43.9	)		451		1,642		(1,191)	(72.5)
(LOSS) INCOME BEFORE INCOME TAXES	(5,431		)	23,258			(28,689		)	N/M
Income tax benefit (expense)	6,411			(6,314		)	12,725			N/M
INCOME (LOSS) BEFORE INCOME TAXES													6,996		(5,431)		12,427	NM
Income tax (expense) benefit													(1,397)		6,411		(7,808)	NM
NET INCOME	980			16,944			(15,964		)	(94.2	)		5,599		980		4,619	471.3
Net loss attributable to non-controlling interests	(174		)	(28		)	(146		)	521.4			(10)		(174)		164	94.3
NET INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.	$	1,154		$	16,972		$	(15,818	)	(93.2	)
NET INCOME ATTRIBUTABLE TO
THE STOCKHOLDERS OF ARGAN, INC.												$	5,609	$	1,154	$	4,455	386.0	%

N/M —– Not meaningful.

Revenues

Power Industry Services

The revenues of the power industry services business ~~decreased~~increased by ~~73%~~147.5%, or ~~$77.2~~$41.1 million, to $69.0 million for the three months ended July 31, 2020 compared with revenues of $27.9 million for the three months ended July 31, ~~2019 compared with~~2019. The revenues of ~~$105.1 million~~this business represented approximately 78.9% of consolidated revenues for the quarter ended July 31, 2020 and 44.2% of consolidated revenues for the prior year quarter. The primary driver for the improved performance by this reportable segment for the current year quarter was the increasing revenues associated with the construction of the Guernsey Power Station. This project, which did not commence until the third quarter last year, represented the significant portion of this segment’s revenues for the three months ended July 31, ~~2018. The revenues of this business represented approximately 44% of consolidated revenues for the current quarter and approximately 77% of consolidated revenues for the prior year quarter.~~2020. GPS reached substantial completion on four gas-fired power plant projects ~~during the year ended January 31,~~late in Fiscal 2019 and concluded activities on a fifth gas-fired power plant early in Fiscal 2020. As a result, the ~~first quarter of the current fiscal year. These five power plants provided~~ revenues of ~~$0.3 million and $75.8 million~~GPS declined substantially for early portions of Fiscal 2020, including the quarter ended July 31, 2019. The significant portions of revenues for this segment for the three-month period ended July 31, 2019 were provided by the operations of APC, including the TeesREP Project. The revenues of APC for the three months ended July 31, ~~2019 and 2018, respectively, representing over a 99% decline. GPS revenue levels have been negatively impacted~~2020 were unfavorably affected by the ~~delay in new project startups. GPS revenues are expected to increase in~~slow resumption of postponed Irish works projects and the ~~second half~~suspension and restart of construction activities on the current year as GPS recently received a FNTP with EPC activities under a contract to build an 1,875 MW natural gas-fired power plant in Guernsey County, Ohio. However, these expected increased revenues at GPS will be partially offset by decreased revenues at APC as the InterGen Spalding OCGT Expansion Project was completed in the three-month period ended July 31, 2019.TeesREP Project.

Industrial Fabrication and Field Services

The revenues of ~~the~~ industrial fabrication and field services ~~business~~ (representing the business of TRC) provided ~~53%~~19.1% of consolidated revenues for the three months ended July 31, ~~2019. Revenues increased by $5.2~~2020, which reflected a reduction in revenues of $16.5 million, or ~~19%~~49.8%, to $16.7 million compared to revenues of $33.2 million for the three months ended July 31, ~~2019, compared~~2019. With the completion of several large projects last year, TRC has been focused on rebuilding the amount of its project backlog. New project awards have increased TRC’s project backlog to ~~$28.0~~approximately $37.4 million ~~for the three months ended~~as of July 31, ~~2018.~~2020 from $14.0 million at the beginning of Fiscal 2021. The largest portion of the revenues of TRC ~~continue~~continues to be provided by industrial field ~~services, which increased by $9.8 million between quarters.~~services. The major customers of TRC include some of North America’s largest forest products companies, large fertilizer producers as well as other chemical ~~energy~~ and ~~mining~~energy companies with plants located in the southeast region of the ~~United States. Over the last few quarters, TRC has been successful in obtaining business from several large new customers while expanding the volume of business from recurring industrial customers.~~US.

Telecommunications Infrastructure Services

The revenues of this business segment (representing the business of SMC) were $1.8 million for the three months ended July 31, 2020 compared with revenues of $1.9 million for the three months ended July 31, 2019 compared with revenues of $3.6 million for the three months ended July 31, 2018. The decrease was primarily due to the completion of a large fiber cabling project that contributed a major portion of revenues last year.2019.

Cost of Revenues

~~Due primarily to~~With the ~~substantial decrease~~increase in consolidated revenues for the three months ended July 31, ~~2019~~2020 compared with last year’s second quarter, the ~~corresponding~~ consolidated cost of revenues also ~~decreased.~~increased between the quarters. These costs were ~~$60.1~~$71.9 million and ~~$106.0~~$60.1 million for the three months ended July 31, 2020 and 2019, ~~and 2018, respectively; a reduction~~respectively, an increase of approximately ~~43%~~19.6%.

For the three months ended July 31, ~~2019,~~2020, we reported a consolidated gross profit of approximately ~~$3.0~~$15.6 million which represented a ~~consolidated~~ gross profit percentage of approximately 5%17.9% of corresponding consolidated revenues. The ~~$3.4 million loss incurred by APC on the TeesREP project~~gross profit for ~~the quarter ended July 31, 2019 had an unfavorable effect on the Company’s gross profit. For~~ the three months ended July 31, ~~2018, we reported a gross profit~~2020 was favorably impacted by the catch-up adjustment recorded by APC with the negotiation of ~~approximately $30.7~~Amendment No. 2 to the TeesREP Project subcontract in the amount of $4.2 million, which ~~represented a consolidated gross profit percentage~~was partially offset by project-related charges in the amount of ~~approximately 22%~~$1.9 million, associated primarily with the unexpected complexity of ~~corresponding consolidated revenues. For~~APC’s works in the ~~three months~~UK and the current year suspension and restart of construction activities. The potentially adverse effects on the craft labor costs of the TeesREP Project of the COVID-19 induced suspension of construction activities was substantially mitigated by cost reimbursement payments received directly from the federal government of the UK during the quarter ended July 31, ~~2019,~~2020 in the amount of $3.2 million. Our gross profit percentages of corresponding revenues for the industrial services and the telecommunications infrastructure segments were 11.1% and 14.4%, respectively. Both results were declines from the gross profit percentages reported for the three months ended July 31, ~~2018, which~~2019 was $3.0 million, or 4.7% of corresponding consolidated revenues. Last year, the TeesREP Project loss recorded by APC for the quarter ended July 31, 2019 in the amount of $3.4 million had a significant unfavorable effect on our gross profit.

Selling, General and Administrative Expenses

These costs were ~~14.3%~~$9.1 million and ~~22.9%,~~$10.0 million for the three months ended July 31, 2020 and 2019, respectively, representing 10.4% and 15.9% of consolidated revenues for the corresponding periods, respectively. As disclosed earlier this year, we expect these costs, expressed as a percentage of corresponding revenues, to trend downward through the remaining quarters of Fiscal 2021 and next year, primarily driven by the expected increase in consolidated revenues over the same periods. The reduction in actual costs between the quarters was due primarily to ~~project close-out adjustments to~~ the ~~gross profits~~increased utilization of ~~certain projects of TRC and fixed overhead cost absorption limitations related to~~staff by GPS on the ~~low volume of revenues at SMC.~~Guernsey EPC project.

Other Income

For the three months ended July 31, 2020 and 2019, the net amounts of other income were $0.5 million and ~~2018,~~$1.6 million, respectively, which represented a reduction of 72.5% between the comparable quarterly periods. The amounts reported for this line item ~~included interest income earned on CDs in the amounts of $0.7 million and $1.0 million, respectively, and $0.6 million and $0.4 million of additional~~reflect primarily investment income earned on funds maintained in a money market account ~~respectively. The weighted average annual~~and interest income earned on CDs. Although the aggregate amount of invested funds has increased between the quarters and since January 31, 2020, the significant drop in interest rates ~~of the CDs owned~~that has occurred during the ~~comparable periods were 2.7% and 1.8%, respectively, and~~COVID-19 pandemic has had a meaningfully adverse effect on the ~~weighted average~~returns earned on our invested funds.

Income Taxes

We reported income ~~rates related to the money market investments were 2.3% and 1.8%, respectively. For~~tax expense for the three months ended July 31, 2019 and 2018, the weighted average initial terms-to-maturity of the CDs were 228 days and 280 days, respectively. For the three months ended July 31, 2018, the amount of this line item also included a gain on TRC’s settlement of a lawsuit2020 in the amount of approximately $1.4 ~~million and reflected interest expense in~~million. We estimate that our annual effective income tax rate for Fiscal 2021 before discrete items will approximate 25.8%. This tax rate differs from the ~~amount~~statutory federal tax rate of ~~$0.1 million related~~21% due primarily to the ~~resolution~~unfavorable effects of ~~a separate legal dispute.~~permanent differences relating to nondeductible travel and entertainment expenses, certain nondeductible executive compensation and interest income earned on our notes receivable from the VIE.

~~Income Tax Benefit (Expense)~~

We ~~recorded~~reported an income tax benefit for the three months ended July 31, 2019 in the amount of approximately $6.4 million which primarily reflected the favorable tax impact of bad debt loss realized on loans made to APC from Argan, which were determined to be uncollectible. We did not record any income tax benefit related to the net loss reported by the subsidiary operations of APC located in the United Kingdom for the current quarter. After eliminating this loss from the forecast of net income for the year, we estimate that our annual effective income tax rate for the year ending January 31, 2020 before discrete items, including the bad debt loss, will approximate 36.3%. This tax rate differs from the statutory federal tax rate of 21% due to state income taxes and the sum of the unfavorable effects of permanent differences associated with nondeductible travel and entertainment expenses, certain nondeductible executive compensation expense and the goodwill impairment loss.

~~For the~~ quarter ended July 31, 2018, we recorded income tax expense of $6.3 million reflecting an annual effective income tax rate of approximately 27.5% (before the tax effect of discrete items for the quarter). The estimated annual income tax rate was higher than the federal income tax rate of 21% due primarily to the estimated unfavorable effect of state income taxes, and the unfavorable effects of additional limitations on the deductibility of certain business expenses.2019.

Comparison of the Results of Operations for the Six Months Ended July 31, ~~2019~~2020 and ~~2018~~2019

We reported net ~~loss~~income attributable to our stockholders of ~~$28.6~~$4.8 million, or ~~$1.84~~$0.31 per diluted share, for the six months ended July 31, ~~2019.~~2020. For the six months ended July 31, ~~2018,~~2019, we reported a ~~comparable~~ net ~~income attributable to our stockholders in the~~loss amount of ~~$21.8~~$28.6 million, or ~~$1.39~~$1.84 per diluted share.

The following schedule compares our operating results for the six months ended July 31, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands):

	Six Months Ended July 31,
	2019			2018			$ Change			% Change

												Six Months Ended July 31,
												2020		2019		$ Change		% Change
REVENUES
Power industry services	$	48,093		$	227,538		$	(179,445	)	(78.9	)%	$	117,651	$	48,093	$	69,558	144.6	%
Industrial fabrication and field services	60,299			44,486			15,813			35.5			26,433		60,299		(33,866)	(56.2)
Telecommunications infrastructure services	4,211			6,012			(1,801		)	(30.0	)		3,556		4,211		(655)	(15.6)
Revenues	112,603			278,036			(165,433		)	(59.5	)		147,640		112,603		35,037	31.1
COST OF REVENUES
Power industry services	73,432			187,458			(114,026		)	(60.8	)		101,320		73,432		27,888	38.0
Industrial fabrication and field services	53,799			39,686			14,113			35.6			23,878		53,799		(29,921)	(55.6)
Telecommunications infrastructure services	3,433			4,732			(1,299		)	(27.5	)		2,803		3,433		(630)	(18.4)
Cost of revenues	130,664			231,876			(101,212		)	(43.6	)		128,001		130,664		(2,663)	(2.0)
GROSS (LOSS) PROFIT	(18,061		)	46,160			(64,221		)	N/M
GROSS PROFIT (LOSS)													19,639		(18,061)		37,700	NM
Selling, general and administrative expenses	19,626			20,015			(389		)	(1.9	)		19,429		19,626		(197)	(1.0)
Impairment loss	2,072			—			2,072			N/M			—		2,072		(2,072)	(100.0)
(LOSS) INCOME FROM OPERATIONS	(39,759		)	26,145			(65,904		)	N/M
INCOME (LOSS) FROM OPERATIONS													210		(39,759)		39,969	NM
Other income, net	3,894			3,692			202			5.5			1,539		3,894		(2,355)	(60.5)
(LOSS) INCOME BEFORE INCOME TAXES	(35,865		)	29,837			(65,702		)	N/M
Income tax benefit (expense)	6,932			(8,051		)	14,983			N/M
NET (LOSS) INCOME	(28,933		)	21,786			(50,719		)	N/M
INCOME (LOSS) BEFORE INCOME TAXES													1,749		(35,865)		37,614	NM
Income tax benefit													3,057		6,932		(3,875)	(55.9)
NET INCOME (LOSS)													4,806		(28,933)		33,739	NM
Net loss attributable to non-controlling interests	(287		)	(23		)	(264		)	N/M			(40)		(287)		247	86.1
NET (LOSS) INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.	$	(28,646	)	$	21,809		$	(50,455	)	N/M
NET INCOME (LOSS) ATTRIBUTABLE TO
THE STOCKHOLDERS OF ARGAN, INC.												$	4,846	$	(28,646)	$	33,492	NM

N/M —– Not meaningful.

Revenues

Power Industry Services

The revenues of the power industry services business ~~decreased~~increased by ~~79%~~144.6%, or ~~$179.4~~$69.6 million, to $117.7 million for the six months ended July 31, 2020 compared with revenues of $48.1 million for the six months ended July 31, 2019, ~~compared~~primarily due to the increasing revenues associated with ~~revenues~~the construction of ~~$227.5 million for~~ the ~~six months ended July 31, 2018.~~Guernsey Power Station. The revenues of this business represented approximately ~~43%~~79.7% of consolidated revenues for the ~~current year~~ six-month period ended July 31, 2020 and approximately ~~82%~~42.7% of consolidated revenues for the comparable prior year period. GPS reached substantial completion on four gas-fired power plant projects ~~during the year ended January 31,~~late in Fiscal 2019 and concluded activities on a fifth gas-fired power plant ~~early~~ in the first quarter of Fiscal 2020. As a result, the ~~current fiscal year. These five power plants provided~~ revenues of ~~$8.7 million and $178.8 million~~GPS declined substantially for the six months ended July 31, 2019 ~~and 2018, respectively, representing a 95% decline. GPS revenue levels have been negatively impacted by~~due to the ~~delay in new~~lack of any meaningful EPC project ~~startups. The~~activity. Conversely, the revenues of APC declined for the six months ended July 31, 2020 from the amount of revenues recognized during the six months ended July 31, 2019, which represented the majority of revenues for this segment ~~also were negatively impacted by decreased activities~~last year, due primarily to the suspension of work on the TeesREP Project and ~~unfavorable adjustments recorded~~the postponement of Irish works in response to the COVID-19 pandemic during the current ~~year related to the TeesREP project.~~year.

Industrial Fabrication and Field Services

The revenues of ~~the~~ industrial fabrication and field services (representing the business of TRC) provided ~~54%~~17.9% of consolidated revenues for the six months ended July 31, ~~2019. Revenues increased by $15.8~~2020, which reflected a reduction in revenues of $33.9 million, or ~~36%~~56.2%, to $26.4 million compared to revenues of $60.3 million for the six months ended July 31, ~~2019, compared~~2019. With the completion of several large projects last year, the low level of activity on projects affected TRC’s revenues most unfavorably during the first quarter of the current year. However, as discussed above, the quarterly revenues of TRC showed meaningful recovery during the second quarter as customers have begun to ~~$44.5~~resume normal plant operations and commence projects suspended earlier this year due to the COVID-19 pandemic. New project awards have increased TRC’s current project backlog to approximately $37.4 million as of July 31, 2020 from $14.0 million at January 31, 2020.

Telecommunications Infrastructure Services

The revenues of this business segment (representing the business of SMC) were $3.6 million for the six months ended July 31, ~~2018. The largest portion of the~~2020 compared with revenues of TRC continue to be provided by industrial field services, which increased by $17.2 million between the comparable periods. The major customers of TRC include some of North America’s largest forest products companies, large fertilizer producers as well as other chemical, energy and mining companies with plants located in the southeast region of the United States. Over the last twelve months, TRC has been successful in obtaining business from several large new customers while expanding the volume of business from recurring industrial customers.

~~Telecommunications Infrastructure Services~~

~~The revenues of this business segment were~~ $4.2 million for the six months ended July 31, 2019 compared with revenues of $6.0 million for the six months ended July 31, 2018. As indicated above, prior year revenues were bolstered by the revenues associated with a large fiber cabling project that has been completed.2019.

Cost of Revenues

~~Due primarily to~~Despite the ~~substantial decrease~~increase in consolidated revenues for the six months ended July 31, ~~2019~~2020 compared with last year’s corresponding period, the ~~corresponding~~ consolidated cost of revenues ~~also decreased.~~decreased between the periods, but only by 2.0%. These costs were $128.0 million, represented substantially by projects costs incurred on the Guernsey Power Station, and $130.7 million, represented substantially by project costs incurred by TRC and ~~$231.9 million~~APC, for the six months ended July 31, 2020 and 2019, ~~and 2018, respectively;~~respectively. Last year, our cost of revenues included a ~~reduction~~charge in the amount of $7.7 million in connection with the establishment of the TeesREP subcontract loss reserve on the books of APC.

For the six months ended July 31, 2020, we reported a consolidated gross profit of approximately ~~44%.~~$19.6 million which represented a gross profit percentage of approximately 13.3% of corresponding consolidated revenues, and which reflected the net favorable effect of the adjustments recorded by APC during the current year quarter as discussed above. Despite these items, the consolidated gross profit percentage for the six months ended July 31, 2020 was adversely affected by the low level of revenues reported by TRC and the Irish operations of APC.

The loss ~~recorded~~incurred by APC on the TeesREP project in the amount of $30.9 million for the six months ended July 31, 2019 had a significant unfavorable effect on the Company’s gross profit, ~~causing us to report~~which was the primary factor in our reporting a consolidated gross loss for the ~~current~~ six-month period in the amount of $18.1 million. ~~For the six months ended July 31, 2018, we reported a gross profit of approximately $46.2~~

Selling, General and Administrative Expenses

These costs were $19.4 million ~~which represented a consolidated gross profit percentage of approximately 17% of corresponding consolidated revenues. For comparison, after removing the revenues~~ and ~~costs related to the TeesREP project, our overall gross profit percentage~~$19.6 million for the six months ended July 31, 2020 and 2019, ~~was 13.4%~~respectively, representing 13.2% and 17.4% of ~~corresponding~~ consolidated ~~revenues. For the six months ended July 31, 2019, the gross profit percentages of corresponding~~ revenues for the ~~industrial services and the telecommunications infrastructure segments were 10.8% and 18.5%,~~corresponding periods, respectively. ~~Both results were fairly consistent with the gross profit percentages reported~~The amount for the six months ended July 31, ~~2018, which were 10.8%~~2020 reflected the costs of maintaining intact the key staff organizations at corporate headquarters, GPS, TRC and ~~21.3%, respectively.~~SMC during the COVID-19 pandemic. We expect these costs, expressed as a percentage of corresponding consolidated revenues, to trend downward through the remaining quarters of Fiscal 2021 and next year, primarily driven by the expected increase in consolidated revenues over the same periods. Last year, selling, general and administrative expenses included the costs of maintaining core members of the operations staff at GPS, before the start-up of new EPC projects, whose time is typically charged to active projects to a greater degree.

Impairment Loss

APC recorded a substantial loss on the TeesREP Project during the first quarter last year. We considered the ~~magnitude~~recognition of ~~the~~a contract loss ~~related to the TeesREP project~~of this magnitude to be an event triggering a re-assessment of the goodwill which resulted in our conclusion that the remaining ~~value~~balance was impaired. Accordingly, an impairment loss was recorded in ~~April 2019 in~~ the amount of $2.1 ~~million.~~million which is reflected in our consolidated operating results for the six months ended July 31, 2019.

Other Income

For the six months ended July 31, 2020 and 2019, ~~and 2018, this line item included interest income earned on CDs in~~ the net amounts of ~~$1.7~~other income were $1.5 million and ~~$2.0~~$3.9 million, respectively, ~~and additional investment income earned on~~which represented a reduction of 60.5% between the comparable periods. Although the aggregate amount of invested funds ~~maintained in a money market account in the amounts of $1.1 million and $0.7 million, respectively. The weighted average annual interest rates of the CDs owned during~~has increased between the comparable periods ~~were 2.6%~~ and ~~1.7%, respectively, and~~since January 31, 2020, the ~~weighted average~~significant drop in interest rates that has occurred during the COVID-19 pandemic has had a meaningful adverse effect on the returns earned on our temporarily invested funds.

Income Taxes

We recorded an income ~~rates related to the money market investments were 2.4% and 1.6%~~tax benefit for ~~the periods, respectively. For~~ the six months ended July 31, 2019 and 2018, the weighted average initial terms-to-maturity of the CDs were 212 days and 259 days, respectively. For the six months ended July 31, 2019, other income also reflected interest income accrued during the period2020 in the amount of ~~$0.7~~approximately $3.1 million, which reflected primarily the net operating loss carryback benefit in the approximate amount of $4.3 million that is discussed in the following paragraph.

In a response to the COVID-19 health crisis, the US Congress passed the CARES Act that was signed into law on March 27, 2020. This wide-ranging legislation was enacted as an emergency economic stimulus package including spending and tax breaks aimed at strengthening the US economy and funding a nationwide effort to curtail the effects of the outbreak of COVID-19. The CARES Act has provided many opportunities for taxpayers to evaluate their 2018 and 2019 income tax ~~refunds~~returns to identify potential tax refunds. One such area is the utilization of NOLs. The tax changes of the CARES Act removed the limitations on the future utilization of certain NOLs and re-established a carryback period for certain losses to five years. The losses eligible for carryback under the CARES Act include our consolidated NOL for Fiscal 2020, which was approximately $39.5 million. Substantially all of this loss now may be carried back for application against our taxable income for the year ended January 31, 2015. This provides a favorable rate benefit for us as the loss, which was incurred in a year where the statutory federal tax rate was 21%, will be carried back to a tax year where the tax rate was higher.

We estimate that ~~we expect to receive related to amended prior year~~our annual effective income tax ~~returns. For~~rate for Fiscal 2021 before discrete items will approximate 25.8%. This tax rate differs from the ~~six months ended July 31, 2018, the amount~~statutory federal tax rate of ~~this line item also included a gain on TRC’s settlement of a lawsuit in the amount of $1.4 million and reflected interest expense in the amount of $0.7 million related~~21% due primarily to the ~~resolution~~unfavorable effects of ~~a separate legal dispute.~~

certain permanent differences as discussed above.

~~Income Tax Benefit (Expense)~~

We recorded an income tax benefit for the six months ended July 31, 2019 in the amount of approximately $6.9 million which primarily reflected the ~~favorable~~ tax ~~impact~~benefit of ~~bad debt~~the loss ~~realized on loans made to APC from Argan,, which were determined to be uncollectible.~~incurred by our domestic operations. We did not record any income tax benefit related to the net loss reported by ~~the subsidiary~~APC’s UK operations ~~of APC located in the United Kingdom~~ for the current year. After eliminating this loss from the forecast of net income for the year, we estimate that our annual effective income tax rate for the year ending January 31, 2020 before discrete items will approximate 36.3% as described above.period.

For the six months ended July 31, 2018, we recorded income tax expense of $8.1 million reflecting an annual effective income tax rate of approximately 28% which was expected at the time. The estimated annual income tax rate was higher than the federal income tax rate of 21% due primarily to the estimated unfavorable effect of state income taxes, and the unfavorable effects of additional limitations on the deductibility of certain business expenses.33

Liquidity and Capital Resources as of July 31, ~~2019~~2020

At July 31 and January 31, ~~2019,~~2020, our balances of cash and cash equivalents were ~~$170.7~~$382.4 million and ~~$164.3~~$167.4 million, respectively. During this same period, our working capital decreased by ~~$40.6~~$7.7 million to ~~$294.4~~$270.0 million as of July 31, ~~2019~~2020 from ~~$335.0~~$277.7 million as of January 31, ~~2019 due~~2020.

The net amount of cash provided by operating activities for the six months ended July 31, 2020 was $102.9 million. Our net income for the six months ended July 31, 2020, adjusted favorably by the net amount of non-cash income and expense items, represented a source of cash in the total amount of $18.3 million. However, the sources of cash from operations for the current year period included primarily a temporary increase in the balance of contract liabilities associated with the early phases of the Guernsey Power Station construction and new project awards at TRC in the amount of $83.3 million. Reductions in the balances of accounts receivable and contract assets, primarily at the TRC and APC operations, provided cash in the amounts of $7.5 million and $6.9 million, respectively. In addition, the combined level of accounts payable and accrued expenses increased by $4.7 million during the six months ended July 31, 2020, a source of cash for the period.

As discussed above, our income tax accounting for the six months ended July 31, 2020 reflects an entry to record the carryback of our net operating loss incurred for the year ended January 31, 2020 to our tax year ended January 31, 2015. The loss carryback should result in a refund of federal income taxes in the amount of $12.6 million. This tax refund receivable has been included in the balance of other current assets as of July 31, 2020, which was the primary cause of the increase in this balance of $17.8 million during the period, a use of cash.

Another primary source of cash for the six months ended July 31, 2020 was the net maturities of short-term investments, certificates of deposit issued by the Bank, in the amount of $135.0 million. Non-operating activities used cash during the six months ended July 31, 2020, including the payment of regular and special cash dividends in the total amount of $23.5 million. During the six-month period ended July 31, 2020, capital expenditures were reduced by approximately 62.8% to $1.1 million from a capital expenditures amount of $3.0 million for the six months ended July 31, 2019. Partially offsetting these uses of cash, we received cash proceeds related to the ~~losses incurred on~~exercise of stock options during the ~~TeesREP project.~~six months ended July 31, 2020 in the amount of $0.7 million. As of July 31, 2020, there were no restrictions with respect to inter-company payments from GPS, TRC, APC or SMC to the holding company. However, during the prior year, certain loans made by Argan to APC were determined to be uncollectible.

~~The~~Last year, the net amount of cash used by operating activities for the six months ended July 31, 2019 was $53.2 million. Our net loss for the ~~current fiscal year~~ period, offset partially by the favorable adjustments related to non-cash income and expense items, used cash in the total amount of ~~$29.7~~$29.6 million. Due substantially to the increased activity at TRC last year, accounts receivable increased during the six months ended July 31, 2019, representing a use of cash in the amount of $9.8 million. The Company also used cash during the six months ended July 31, 2019 in the amount of $16.4 million to reduce the level of accounts payable and accrued ~~liabilities.~~expenses. The net balance of contract assets and liabilities did not change materially during the ~~period.~~six-month period ended July 31, 2019. Due primarily to the ~~expected~~ receipt of refunds of excess estimated income tax payment amounts, the balance of other assets decreased by $2.7 million during the six months ended July 31, ~~2019;~~2019, a source of cash.

The primary source of cash required to fund operations during the six months ended July 31, 2019 was the net maturity of short-term investments ~~certificates of deposit issued by our Bank,~~ in the amount of $69.0 million. Cash proceeds in the amount of $1.6 million were received from the exercise of stock options during the six-month period ended July 31, 2019. Non-operating activities used cash during the six months ended July 31, 2019, including primarily the payment of ~~two~~a quarterly cash ~~quarterly~~ dividends in the total amount of $7.8 million. ~~Our~~As indicated above, our operating subsidiaries ~~also~~ used cash during the six-month period ended July 31, 2019 in the amount of $3.0 million to fund capital expenditures. As of July 31, 2019, there were no restrictions with respect to inter-company payments from GPS, TRC, APC or SMC to the holding company. However, during the three-month period ended July 31, 2019, certain loans made by Argan to APC were determined to be uncollectible (see Note 11 to the accompanying condensed consolidated financial statements).

During the six months ended July 31, 2018, our balance of cash and cash equivalents increased by $43.7 million to $165.8 million while our working capital increased by $11.6 million during the period to $313.4 million as of July 31, 2018.

The net amount of cash used by operating activities for the six months ended July 31, 2018 was $58.5 million. Even though net income for the period, including the favorable adjustments related to non-cash expense items, provided cash in the total amount of $23.9 million, cash used in operations exceeded this amount, primarily due to the effects of four major EPC projects that were nearing completion. Because these projects were well past the peak of their respective milestone billing schedules at that time, the amounts of billings in excess of the amounts of the corresponding costs and estimated earnings on these projects declined by $62.8 million during the six months ended July 31, 2018; a use of cash. On the other hand, the Company collected amounts of billings previously retained by project owners which provided $46.3 million in cash during the period. During the six months ended July 31, 2018, the operations of TRC and APC experienced meaningful growth in revenues. As expected, the increase in the level of business resulted in an increase in the amount of working capital required to support the growth at that time. Accordingly, the amounts of costs incurred and estimated earnings recognized on certain active projects in excess of the amounts billed on those projects rose during the six-month period in the amount of $24.5 million, which represented a use of cash. As a result, we experienced an increase of $21.0 million in the amount of contract assets and a decrease of $23.2 million in the amount of contract liabilities during the six months ended July 31, 2018, which together represented a use of cash in the amount of $44.2 million. Due in part to increased activity at that time at our operating subsidiaries, accounts

receivable increased during the six months ended July 31, 2018, a use of cash in the amount of $19.9 million. The Company also used cash in the amount of $18.7 million to reduce the level of accounts payable and accrued liabilities.

Our primary source of this cash during the six months ended July 31, 2018 was the net maturity of short-term investments in the amount of $115.5 million. Non-operating activity cash uses included primarily the payment of two cash quarterly dividends in the total amount of $7.8 million. Our operating subsidiaries used cash during the six-month period ended July 31, 2018 in the amount of $5.4 million for capital expenditures.

At July 31, ~~2019,~~2020, most of our balance of cash and cash equivalents was invested in a money market fund with most of its total assets invested in cash, ~~U.S.~~US Treasury obligations and repurchase agreements secured by ~~U.S.~~US Treasury obligations. ~~Most of~~The major portion our domestic operating bank ~~accounts~~account balances are maintained with the Bank. We do maintain certain Euro-based bank accounts in ~~the Republic of~~ Ireland and certain pound sterling-based bank accounts in the ~~United Kingdom~~UK in support of the operations of APC.

Our Credit Agreement, ~~with the Bank,~~ which expires on May 31, 2021, includes the following features, among others: a lending commitment of $50.0 million including a revolving loan with interest at the 30-day LIBOR plus 2.0%, and an accordion feature which allows for an additional commitment amount of $10.0 million, subject to certain conditions. We may use the borrowing ability to cover ~~letters of~~other credit instruments issued by the Bank for our use in the ordinary course of business as defined by the Bank. At July 31, ~~2019,~~2020, we had ~~approximately $12.3~~$1.7 million of outstanding letters of credit issued under the Credit ~~Agreement that relate substantially to the TeesREP project.~~Agreement. However, we had no outstanding borrowings. Additionally, in connection with the current project development activities by a VIE, the Bank issued a letter of credit, outside the scope of the Credit Agreement, in the approximate amount of $3.4 million for which the Company has provided cash collateral.

We have pledged the majority of our assets to secure the financing arrangements. The Bank’s consent is not required for acquisitions, divestitures, cash dividends or significant investments as long as certain conditions are met. The Credit Agreement requires that we comply with certain financial covenants at our fiscal year-end and at each fiscal quarter-end, and includes other terms, covenants and events of default that are customary for a credit facility of its size and nature. At July 31 and January 31, ~~2019,~~2020, we were compliant with the financial covenants of the Credit Agreement. ~~However,~~

In the normal course of business and for certain financial covenant requirements are based on the amount of earnings before interest, taxes, depreciation and amortization, as defined in the Credit Agreement, reported by us on a rolling twelve-month basis. The loss incurred by us for the current six-month period has reduced the financial covenant compliance margins considerably.

~~We maintain a variety of commercial commitments that are generally made available~~major projects, we may be required to obtain surety or performance bonding, to provide ~~support for various commercial provisions~~parent company guarantees, or to cause the issuance of letters of credit (or some combination thereof) in ~~the engineering, procurement and construction contracts.~~ order to provide performance assurances to clients on behalf of one of our contractor subsidiaries.

For certain projects, we are required by project owners to provide guarantees related to our services or work. If our services under a guaranteed project would not be completed or would be determined to have resulted in a material defect or other material deficiency, then we ~~may~~could be responsible for monetary damages or other legal remedies.

~~In the ordinary course of business but primarily at GPS, our customers~~ Certain project owners may request that we obtain surety bonds for their benefit in connection with ~~construction~~EPC services contract performance obligations. WeAs is typically required by any surety bond, the Company would be obligated to reimburse the issuer of ~~our~~any surety ~~bonds~~bond issued on behalf of a subsidiary for any cash payments ~~made. Each of our~~made thereunder. The commitments under performance bonds generally ~~ends~~end concurrently with the expiration of the related contractual obligation. ~~As of July 31, 2019, the amount of unsatisfied bonded performance obligations related to GPS was not significant.~~ Not all of our projects require bonding. ~~However,~~

On behalf of APC, Argan has provided a parent company performance guarantee to its customer, the EPC services contractor on the TeesREP Project. During the quarter ended July 31, 2020 and in connection with the negotiation of Amendment No. 2, the Company replaced an outstanding letter of credit in the amount of $7.6 million with a surety bond as the support for the parent company performance guarantee (see Note 7 to the accompanying condensed consolidated financial statements).

As of July 31, 2020, the revenue value of the Company’s unsatisfied bonded performance obligations was less than the value of RUPO disclosed in Note 2 to the accompanying condensed consolidated financial statements. In addition, as of July 31, ~~2019,~~2020, there were bonds outstanding in the aggregate amount of approximately ~~$158.0~~$64.4 million covering other risks including ~~our~~ warranty obligations related to projects completed by GPS; these bonds expire at various dates during the years ending January 31, 2021 and 2022.

When sufficient information about claims related to our performance on projects bywould be available and monetary damages or other costs or losses would be determined to be probable, we would record such guaranteed losses. As our subsidiaries are wholly-owned, any actual liability related to contract performance is ordinarily reflected in the financial statement account balances determined pursuant to the Company’s accounting for contracts with customers. Any amounts that we may be required to pay in excess of the estimated costs to complete contracts in progress as of July 31, 2020 are not estimable.

We have also provided a financial guarantee on behalf of GPS to an original equipment manufacturer in the amount of $3.6 million to support project developmental efforts which resulted in the award of an EPC services contract to GPS.

We believe that cash on hand, cash that will be provided from the remaining maturities of short-term investments and cash generated from our future operations, with or without funds available under our line of credit, will be adequate to meet our general business needs in the foreseeable future. For the six months ended July 31, 2020, to assure an optimum level of liquidity during this period of uncertainty and to mitigate the market risks represented by the COVID-19 pandemic, management decided to temporarily maintain larger balances of cash and cash equivalents relative to short-term investments with minimal opportunity cost.

In ~~particular,~~general, we maintain significant liquid capital on our balance sheet to help ensure our ability to maintain bonding capacity and to provide parent company performance guarantees for EPC and other construction projects. Any future acquisitions, or other significant unplanned cost or cash requirement, may require us to raise additional funds through the issuance of debt and/or equity securities. There can be no assurance that such financing will be available on terms acceptable to us, or at all.

Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”)

We believe that EBITDA is a meaningful presentation that enables us to assess and compare our operating cash flow performance on a consistent basis by removing from our operating results the impacts of our capital structure, the effects of the accounting methods used to compute depreciation and amortization and the effects of operating in different income tax jurisdictions. Further, we believe that EBITDA is widely used by investors and analysts as a measure of performance.

However, as EBITDA is not a measure of performance calculated in accordance with ~~U.S.~~US GAAP, we do not believe that this measure should be considered in isolation from, or as a substitute for, the results of our operations presented in accordance with ~~U.S.~~US GAAP that are included in our condensed consolidated financial statements. In addition, our EBITDA does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs.

The following table presents the determinations of EBITDA for the three and six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively (amounts in thousands):

	Three Months Ended July 31,
	2019			2018

							Three Months Ended
							July 31,
							2020		2019
Net income, as reported	$	980		$	16,944		$	5,599	$	980
Interest expense	—			110
Income tax (benefit) expense	(6,411		)	6,314
Income tax expense (benefit)								1,397		(6,411)
Depreciation	882			796				921		882
Amortization of purchased intangible assets	293			253				226		293
EBITDA	(4,256		)	24,417				8,143		(4,256)
EBITDA of non-controlling interests	(172		)	(28		)		(10)		(174)
EBITDA attributable to the stockholders of Argan, Inc.	$	(4,084	)	$	24,445		$	8,153	$	(4,082)

	Six Months Ended July 31,
	2019			2018
Net (loss) income, as reported	$	(28,933	)	$	21,786
Interest expense	—			659
Income tax (benefit) expense	(6,932		)	8,051

							Six Months Ended
							July 31,
							2020		2019
Net income (loss), as reported							$	4,806	$	(28,933)
Income tax benefit								(3,057)		(6,932)
Depreciation	1,711			1,567				1,858		1,711
Amortization of purchased intangible assets	592			506				451		592
EBITDA	(33,562		)	32,569				4,058		(33,562)
EBITDA of non-controlling interests	(287		)	(23		)		(40)		(287)
EBITDA attributable to the stockholders of Argan, Inc.	$	(33,275	)	$	32,592		$	4,098	$	(33,275)

As we believe that our net cash flow provided by or used in operations is the most directly comparable performance measure determined in accordance with ~~U.S.~~US GAAP, the following table reconciles the amounts of EBITDA for the applicable periods, as presented above, to the corresponding amounts of net cash flows provided by or used in operating activities that are presented in our condensed consolidated statements of cash flows for the six months ended July 31, ~~2019~~2020 and ~~2018~~2019 (amounts in thousands).

Six Months Ended July 31,

2019

2018

EBITDA

$
(33,562
)
$
32,569

Current income tax benefit (expense)

210

(7,127
)
Interest expense

—

(659
)
Stock option compensation expense

926

906

Impairment loss

2,072

—

Gain on settlement of litigation

—

(1,400
)
Other non-cash items

650

(380
)
Increase in accounts receivable

(9,835
)
(19,946
)
Decrease in other assets

2,722

337

Decrease in accounts payable and accrued expenses

(16,371
)
(18,659
)
Change in contracts in progress, net

24

(44,173
)
Net cash used in operating activities

$
(53,164
)
$
(58,532
)


	Six Months Ended
	July 31,
	2020		2019
EBITDA	$	4,058	$	(33,562)
Current income tax benefit		11,593		210
Stock option compensation expense		1,414		926
Impairment loss		—		2,072
Other non-cash items		1,192		724
Decrease (increase) in accounts receivable		7,532		(9,835)
(Increase) decrease in other assets		(17,781)		2,722
Increase (decrease) in accounts payable and accrued expenses		4,714		(16,445)
Change in contracts in progress, net		90,179		24
Net cash provided by (used in) operating activities	$	102,901	$	(53,164)

Critical Accounting Policies

We consider the accounting policies related to the recognition of revenues from customer contracts; the accounting for business combinations; the subsequent valuation of goodwill, other indefinite-lived assets and long-lived assets; income tax reporting; the valuation of employee stock options and the financial reporting associated with any significant legal matters to be most critical to the understanding of our financial position and results of operations, as well as the accounting and reporting for special purpose entities including VIEs.

Critical accounting policies are those related to the areas where we have made what we consider to be particularly subjective or complex judgments in arriving at estimates and where these estimates can significantly impact our financial results under different assumptions and conditions. These estimates, judgments, and assumptions affect the reported amounts of assets, liabilities and equity, the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets, liabilities and equity that are not readily apparent from other sources. Actual results and outcomes could differ from these estimates and assumptions.

We consider the accounting policies related to revenue recognition on long-term construction contracts; income tax reporting; the accounting for business combinations; the subsequent valuation of goodwill, other indefinite-lived assets and long-lived assets; the valuation of employee common stock-based awards; and the financial reporting associated with any significant claims or legal matters to be most critical to the understanding of our financial position and results of operations, as well as the accounting and reporting for special purpose entities including joint ventures and variable interest entities. An expanded discussion of our critical accounting policies is included in Item 7 of Part II of our Annual Report. During the six-month period ended July 31, ~~2019,~~2020, there have been no material changes in the way we apply the critical accounting policies described ~~therein except that Note 7~~therein.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which, among other changes, eliminates the exception to the ~~accompanying condensed consolidated financial statements presents~~general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the ~~revised accounting policy~~expected loss for ~~leases~~the entire year. In these instances, the estimated annual effective income tax rate shall be used to calculate the tax without limitation. The new standard also requires the recognition of a franchise (or similar) tax that ~~was adopted~~is partially based on income as an income-based tax and the recording of any incremental tax that is incurred by us as a non-income based tax. The requirements of this new guidance, effective for us on February 1, ~~2019.~~2021, are not expected to alter our accounting for income taxes.

As discussed above, APC has confronted significant operational and contractual challenges in its efforts to complete the TeesREP project. Comprehensive reviews of forecasted costs to complete the project and the expected amounts of contract variation recoveries have resulted in our current estimate that APC will incur a loss on this contract in the amount of $30.9 million. As disclosed in Note 5 to the accompanying condensed consolidated financial statements, this loss prompted us to record an impairment loss during the six-month period ended July 31, 2019 in the amount of approximately $2.1 million, which effectively wrote-off the remaining balance of goodwill related to APC. In addition, we have estimated the amount of income tax benefit in the amount of $5.9 million related to bad debt loss incurred by Argan on its loans to APC, which were made at the time for the purpose of funding the performance on the TeesREP project; this amount is included in the income tax benefit amounts presented in the condensed consolidated statements of earnings for the three and six months ended July 31, 2019.

~~Recently Issued Accounting Pronouncements~~

In 2016, the FASB also issued ~~Accounting Standards Update~~ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The ~~scope~~requirements of this new standard ~~covers,~~cover, among other provisions, the methods that businesses shall use to estimate amounts of ~~uncollectible accounts receivable.~~credit losses. As subsequently amended, ~~we do not expect that~~ the ~~requirements~~adoption of this new guidance, which ~~becomes~~became effective for us on February 1, 2020, ~~will materially~~did not affect our consolidated financial statements.

There are no other recently issued accounting pronouncements that have not yet been adopted that we consider material to our consolidated financial statements. As required for us, we adopted ASU 2016-02, Leases, as of February 1, 2019.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, our results of operations may be subject to risks related to fluctuations in interest rates. As of July 31, ~~2019,~~2020, we had no outstanding borrowings under our financing arrangements with the Bank (see Note 6 to the accompanying condensed consolidated financial statements), which provide a revolving loan with a maximum borrowing amount of $50.0 million that is available until May 31, 2021 with interest at 30-day LIBOR plus 2.0%.

~~As of July 31, 2019, the weighted average annual interest rate on our short-term investments of $62.0 million was 2.7%.~~ During the six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, we did not enter into derivative financial instruments for trading, speculation or other purposes that would expose us to market risk. ~~To illustrate~~

Financial markets around the ~~potential impact~~globe are preparing for the discontinuation of ~~changes~~LIBOR at the end of 2021 as the widely used indicator of basis for short-term lending rates. The transition from LIBOR is market-driven, not a change required by regulation. The US and other countries are currently working to replace LIBOR with alternative reference rates. We do not expect that the replacement of LIBOR as the basis for the determination of our short-term borrowing rate will have significant effects on the financial arrangements with the Bank or our financial reporting.

We maintain a substantial amount of our temporarily investable funds in ~~interest rates on~~a money market account (see Note 3 of the accompanying condensed consolidated financial statements). The balance of these funds, which was included in cash and cash equivalents in our ~~results of operations, we have performed the following hypothetical analysis, which assumes that our~~condensed consolidated balance sheet as of July 31, ~~2019 remains constant, and no further actions are taken to alter our existing~~2020, was $298.8 million with earnings based on an annual yield of 0.05%. The significant drop in interest ~~rate sensitivity (dollars in thousands). As~~rates during the ~~weighted average annual interest rate on our short-term investments was 2.7% at~~six months ended July 31, ~~2019, the largest decrease~~2020 has caused a significant reduction in the ~~interest rates presented above is 270 basis points.~~investment returns earned on these funds by us. At January 31, 2020, our money market funds were providing earnings based on an annual yield of 1.49%.

Basis Point Change

Increase (Decrease) in
Interest Income

Increase (Decrease) in
Interest Expense

Net Decrease (Increase) in
Loss (pre-tax)

Up 300 basis points

$
271

$
—

$
271

Up 200 basis points

180

—

180

Up 100 basis points

90

—

90

Down 100 basis points

(90
)
—

(90
)
Down 200 basis points

(180
)
—

(180
)
Down 270 basis points

(233
)
—

(233
)

With the ~~acquisition~~consolidation of APC, we are subject to the effects of translating the financial statements of APC from its functional currency (Euros) into our reporting currency ~~(U.S.~~(US dollars). Such effects are recognized in accumulated other comprehensive loss, which is net of tax when applicable. APC remeasures transactions and subsidiary financial statements denominated in local currencies to Euros. Gains and losses on the remeasurements are recorded in the other income line of our condensed consolidated statements of earnings.

In addition, we are subject to fluctuations in prices for commodities including copper, concrete, steel products and fuel. Although we attempt to secure firm quotes from our suppliers, we generally do not hedge against increases in prices for ~~copper, concrete, steel or fuel.~~these commodities. Commodity price risks may have an impact on our results of operations due to the fixed-price nature of many of our contracts. We attempt to include the anticipated amounts of price increases or decreases in the costs of our bids.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of July 31, ~~2019.~~2020. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of July 31, ~~2019,~~2020, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified by the SEC, and the material information related to the Company and its consolidated subsidiaries is made known to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure in the reports.

Changes in internal controls over financial reporting. There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) during the fiscal quarter ended July 31, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

~~PART II~~

ITEM 1. LEGAL PROCEEDINGS

Included in Note 8 to the condensed consolidated financial statements that are included in Item 1 of Part I of this Quarterly Report on Form 10-Q is the discussion of the status of a specific legal proceeding as of July 31, ~~2019.~~2020. In the normal course of business, we may have other pending claims and legal proceedings. It is our opinion, based on information available at this time, that any other current claim or proceeding will not have a material effect on our condensed consolidated financial statements.

ITEM 1A.RISK FACTORS

There have been no material changes ~~from our~~to the risk factors as disclosed in our Annual Report.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On June 24, 2020, we made a filing on Current Report Form 8-K announcing that our board of directors authorized the repurchase of up to $25.0 million of our issued and outstanding common stock through June 2022 (the “Repurchase Plan”). The repurchases may occur in the open market, through investment banking institutions, privately-negotiated transactions, or direct purchases, and the timing and amount of stock repurchased will depend on market and business conditions, applicable legal and credit requirements and other corporate considerations. To date, there have not been any purchases made under the Repurchase Plan.

~~None~~

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None

ITEM

~~ITEM~~ 4.MINE SAFETY DISCLOSURES (not applicable)

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

~~Exhibit No.~~		~~Title~~
Exhibit No.		Title
Exhibit 31.1		Certification of Chief Executive Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of ~~1934~~1934.
Exhibit 31.2		Certification of Chief Financial Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of ~~1934~~1934.
Exhibit 32.1		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section ~~1350~~1350. *
Exhibit 32.2		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section ~~1350~~1350. *

Exhibit ~~101.INS#~~101: Exhibit 101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit ~~101.SCH#~~101.SCH		Inline XBRL ~~Schema Document~~Taxonomy Extension Schema.
Exhibit ~~101.CAL#~~101.CAL		Inline XBRL Taxonomy Extension Calculation ~~Linkbase Document~~Linkbase.
Exhibit ~~101.LAB#~~101.LAB		Inline XBRL ~~Labels Linkbase Document~~Taxonomy Label Linkbase.
Exhibit ~~101.PRE#~~101.PRE		Inline XBRL Taxonomy Presentation ~~Linkbase Document~~Linkbase.
Exhibit ~~101.DEF#~~101.DEF		Inline XBRLTaxonomy Extension Definition Document.
Exhibit 104		Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL ~~Definition Linkbase Document~~tags are embedded within the Inline XBRL document.

*	The certification is being furnished and shall not be considered filed as part of this report.

* The certification is being furnished and shall not be considered filed as part of this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	ARGAN, INC.


September 9, ~~2019~~2020	By:	/s/ Rainer H. Bosselmann
		Rainer H. Bosselmann
		Chairman of the Board and Chief Executive Officer


September 9, ~~2019~~2020	By:	/s/ David H. Watson
		David H. Watson
		Senior Vice President, Chief Financial Officer,
		Treasurer and Secretary